NEW YORK (MainStreet) -- The roiling global financial markets have claimed a lot of victims in the past two weeks as about $6.8 trillion worth of equity has been lost in the stock market since July 26, but the outliers are impacting bank consumers in other ways as well.
Take mortgage rates: After Standard & Poor’s downgraded the U.S. debt standing last Friday, economists expected interest rates to rise, to reflect the higher price Uncle Sam would have to pay to borrow money, primarily through the issuance of U.S. Treasury debt.
To be fair, that still could happen, but it certainly hasn’t happened in the U.S. mortgage market. The BankingMyWay Weekly Mortgage Rate tracker shows rates continuing to drop for almost all terms:
- One-Year ARM - 3.242%
- Three-Year ARM - 3.225%
- Five-Year ARM - 3.353%
- 15-Year Mortgage - 3.691%
- 30-Year Mortgage - 4.496%
- One-Year ARM - 3.82%
- Three-Year ARM - 3.504%
- Five-Year ARM - 3.331%
- 15-Year Mortgage - 3.829%
- 30-Year Mortgage - 4.540%
With the exception of the five-year adjustable rate mortgage – usually the most stable of the ARM family – all other rate categories are in freefall. One- and three-year adjustable rate mortgages have swung wildly, and are now in a solid downward trajectory, with the one-year version dropping by a whopping 580 basis points, and the three-year ARM falling by almost 300 basis points.
That makes those adjustable-rate loans much cheaper, but note this: ARMs include the term "adjustable" for a good reason. They reset or adjust at the one-year or three-year mark, and that reset could push your mortgage rate up if the economists are correct and interest will be rising soon.
Fixed-rate mortgages are also down this week, and substantially so, although they’re not as volatile as ARMs. While both fixed-rate and adjustable-rate mortgages are tied to the U.S. prime rate – the most common benchmark used by banks for short-term interest rate guidance. (that rate stands at 3.25% right now.)