A new marketing push around adjustable-rate mortgages at Newrez highlights a change in the relative pricing of the loans that has increased their attractiveness in certain niches.
Newrez is selling ARMs that are fixed for five, seven or 10 years before adjusting in niches that include
A change in the relationship between short- and long-term rates has made ARMs more attractive, Jeff Gravelle, chief production officer at Newrez, noted. Although the current market typically has favored fixed rate loans, the relative discount for five-year products has increased.
“The move ... definitely helped us reprioritize ARMs...after a year of historically low rates,” Gravelle said in an email.
Since March, the average rate for a mainstream five-year ARM has been low relative to the standard 30-year fixed product, according to data from Freddie Mac’s weekly survey. Last week, the average 30-year FRM rate was 2.78%, vs. 2.49% for a five-year hybrid. In contrast, back in late February, the average rate for a 30-year FRM was 2.97% vs. 2.99% for a five-year ARM.
Those rates correspond to more mainstream loans and may be higher for the more specialized products Newrez is offering, but the relative attractions in ARM pricing exist in both markets.
Newrez is marketing ARMs both in the aforementioned non-QM niche, and the jumbo market for loans outside
To be sure, consumers may still generally find the predominant 30-year fixed-rate mortgage more attractive because it locks in rates close near historical lows for a longer period of time. However, for borrowers planning to move in five to 10 years, ARM prices may look favorable. Consumers ultimately need to weigh the monthly savings benefit versus. the ability to lock in a long-term rate, Gravelle said.
Newrez is offering its ARM products through its joint-ventures with real estate agents, wholesale, correspondent and online and call center channels.
