This is a graph of combined average initial interest rates for 10/1-year Hybrid Adjustable Rate Mortgages over the last six months, derived from data gathered as part of HSH's editorial surveys. The weekly 10/1 Hybrid ARM data that populates this graph of average rates can be seen in HSH's Statistical Release.
The 10/1 ARM has a fixed interest rate for the first ten years of the loan, which is usually a total of 30 years. After the first ten years, the interest rate adjusts each year for the remaining 20-year term.
There are times when 10/1 hybrid ARMs offer a reasonable interest-rate advantages over 30-year fixed rate mortgages, and other times when they do not. In many cases, borrowers choose a long-term fixed rate mortgage rather than a 10/1 ARM, as the interest-rate and monthly payment break isn't sufficient to warrant giving up 20 years worth of additional rate stability. Still, they do have their place on the mortgage menu, as even a small break in rate can add up to considerable savings over a 10 year period, especially for borrowers with large loan amounts.
HSH's combined averages give a realistic picture of local mortgage markets, particularly important in high-cost areas.