WASHINGTON -- The Federal Housing Finance Board said 31% of conventional mortgage loans closed in April had adjustable interest rates, up sharply from a 23% share in March.

The April figure was the highest since November 1990, the board said. It noted that the recent low in average fixed rates was 6.87% in October. At the time, the fixed rate was 1.52 percentage point greater than for adjustable-rate loans. But the rate differential widened to 1.82 percentage point in April.

"The widening rate differential in the mortgage market reflects the widening differential in the Treasury securities market," the board's report said. "Last October, the rate spread between one- and 10-year Treasury securities was 1.94%," it said. "This had expanded to 2.15% by April."

The Federal National Mortgage Association reported earlier in the week that its 30-year, fixed-rate loans had surged in popularity since the beginning of this year. But this was only at the expense of shorter-term loans, which have become too costly for many borrowers.

Fannie Mae does very little business in adjustable-rate loans. Portfolio lenders have experienced a surge in originations at adjustable rates and are holding the loans rather than selling them into the secondary market.

The board said the average contract interest rate on all mortgages closed in April was 7.05%, up 21 basis points from the March level. It said this was the largest monthly increase in mortgage rates since May 1989.

It said the effective rate on all loans closed in April averaged 7.23%, a rise of 23 basis points. The average effective rate on all loans is a composite of the average effective interest rate of 7.80% on fixed-rate loans and 5.95% on adjustable-rate loans.

The effective rate includes initial fees and charges averaging 1.06% of the loan balance that are amortized over 10 years. Reflecting the popularity of no-point loans, the board said, about 30% of loans had no initial fees and charges.

Edward Kulkosky contributed to this article.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.