Adjustable-rate mortgages accounted for more than 11% of rate locks in Intercontinental Exchange’s October Mortgage Monitor, as higher fixed borrowing costs sharpened the choice facing U.S. homebuyers.
ICE said its Conforming 30-year Fixed Rate Index was 7.2% on Sept. 24 and linked the higher ARM share to rising fixed rates. The company counted 3.1 million active first-lien ARMs, or 5.6% of active mortgages; 1.05 million had reached their first reset. ICE said that, among loans begun in 2022 or later, over 90% remained within their opening fixed-rate term.
ICE estimated that if ARM indexes absorbed a full 25-basis-point increase, the median affected borrower would pay about $14 more per month. That estimate depends on a complete pass-through and does not represent a payment change already experienced.
At its Sept. 15-16 meeting, the Federal Open Market Committee (FOMC) voted 12-0 to lift the federal funds target range by 0.25 percentage point, to 3.75% to 4%. Minutes released Oct. 7 indicated that most participants thought another increase might be warranted by year-end, depending on incoming data. Consumer prices rose 3.7% in the 12 months through September, up from 3.4% through August, the U.S. Bureau of Labor Statistics (BLS) reported; prices excluding food and energy rose 2.6%.
The Federal Reserve Bank of New York (New York Fed) reported that household debt totaled $18.8 trillion in the second quarter. Credit-card balances rose $21 billion to $1.26 trillion, while 4.7% of outstanding household debt was in some stage of delinquency.
Third-quarter earnings materials showed different trends across lenders. Capital One’s credit-card net charge-off rate fell to 4.01% from 4.61% a year earlier. JPMorgan Chase’s Card Services rate declined to 2.91% from 3.15%. Synchrony Financial’s overall net charge-off rate was 4.79%, down from 5.16%; its measure covers average loan receivables that include noncard loans.
Capital One’s provision for credit losses fell $73 million from the second quarter to $2.9 billion, including a $225 million reserve release. Synchrony’s provision rose 10% to $1.3 billion, mainly reflecting a $30 million reserve build; the year-earlier quarter included a $152 million reserve release.
Ally Financial’s retail auto net charge-off rate was 1.89%, up one basis point year over year, while delinquencies of 30 days or more reached 4.96%, up six basis points. Ally’s auto-finance provision increased $101 million from a year earlier to $511 million; the company linked the increase to reserves added as its loan book expanded. The lender figures cover different portfolios and do not isolate the effect of interest rates.
The FOMC meets Oct. 27-28, with its next policy decision scheduled for Oct. 28.
