This is a graph of combined average initial interest rates for 3/1-year Hybrid Adjustable Rate Mortgages over the last six months, derived from data gathered as part of HSH's editorial surveys. The weekly 3/1 Hybrid ARM data that populates this graph of average rates can be seen in HSH's Statistical Release.
The 3/1 ARM has a fixed interest rate for the first three years of the loan, which is usually a total of 30 years. After the first three years, the interest rate adjusts each year for the remaining 27-year term.
Three-one hybrid ARMs appeal to homebuyers looking for a period of payment stability, and to refinancers with very short time frames. Although the first interest rate change comes pretty soon, most 3/1 ARMs limit the first interest rate change to a rise of no more than two percentage points, so there is pretty good protection for the borrower in the fourth year even if interest rates have risen.
HSH's combined averages give a realistic picture of local mortgage markets, particularly important in high-cost areas.