WASHINGTON – Despite an overall decline in mortgage originations, adjustable-rate mortgages (ARMS) and interest only products made up 63% of mortgage originations in the second half of 2004, results of the Mortgage Bankers Association's Single-Family Mortgage Activity Survey. ARMs originations were split almost evenly between traditional ARMs (53%)- the interest rate is fixed – and hybrid ARMs (47%). MBA Chief Economist and SVP Doug Duncan said it's not surprising that ARM share has risen over the last year because "consumers shift to ARMs when long-term rates rise and when the spread between long- and short-term rates widens." He adds that, "This interest rate cycle is unusual in that the increase in ARMs has occurred with a much smaller increase in rates than in past cycles. One reason is that house-price appreciation leading up to this ARM cycle was much stronger than in previous ones, creating affordability constraints that led a number of buyers to seek lower payments with ARMs." -

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