WASHINGTON - Adjustable-rate mortgages continued to lose popularity in March, accounting for just 44% of the market. That level was the lowest since August.

The March data, reported Wednesday by the Federal Housing Finance Board, was the latest sign that consumers are shifting to fixed-rate mortgages, as rates on those loans have dropped.

In February, ARMs had slid to a 53% market share after hitting a six- year high of 59% in January.

Analysts predict that the drop will continue all year, as the difference between long-term rates and short-term rates narrows. Interest rates on fixed-rate loans follow long rates, while ARMs follow short rates.

March's decline brought ARMs below a 50% market share for the first time in five months. Some analysts believe that, by yearend, only a quarter of new loans being written will carry adjustable rates.

The finance board said the decline in the ARM share was broadly based.

At thrifts, 69% of loans originated in March had adjustable rates, down from 80% in February. At commercial banks, 57% of loans made in March were ARMs, down from 64% in February. And at mortgage banks, 27% were ARMs, down from 38% in February.

Sixty-two percent of ARMs closed in March were linked to the yield on one-year Treasury securities, the board said.

Twenty percent were linked to the 11th District Cost-of-Funds Index. The COFI Index is the dominant benchmark used by thrifts in California.

The average ARM originated in March will have its first rate adjustment after 26 months.

On average, a one-year Treasury ARM will adjust in 33 months; an 11th District ARM, in six months.

The average one-year Treasury ARM will have subsequent rate adjustments every 11 months, while those indexed to COFI will adjust every three months, the board said.

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