Mortgage rates stabilizeINTEREST RATE ACTIVITY

Finally, a week without much change in fixed mortgage rates. The benchmark 30-year fixed-rate mortgage fell 3 basis points, to 5.95 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.49 discount and origination points. One year ago, the mortgage index was 6.22 percent; four weeks ago, it was 6.41 percent.

The benchmark 15-year fixed-rate mortgage went the other way, rising 7 basis points, to 5.53 percent. The benchmark 5/1 adjustable-rate mortgage fell 28 basis points, to 6.16 percent, while the 1-year ARM rose 11 basis points, to 6.25 percent. The 30-year jumbo fell 6 basis points, to 7.37 percent.

The 30-year fixed is at its lowest since the first week of February, toward the end of a six-week run when mortgage rates stayed below 6 percent.

It's rare for the 30-year fixed and 15-year fixed to move decisively in opposite directions, but that's what happened this week. Similarly, it's unusual to see the 5/1 ARM and 1-year ARM each move in double digits in opposite directions.

On Monday, it looked as if mortgage rates would surge. On that day, JPMorgan Chase raised its offer for Bear Stearns to $10 a share from $2 a share. That revised offer, plus a report that home sales had increased in February, impelled investors to sell bonds and buy stocks. Normally, that would make mortgage rates rise across the board. But they moved every which way.

ARMs moving down

Very short-term interest rates have been heading down in response to the Fed's rate cuts, and that will spell good news to homeowners with hybrid ARMs, according to Standard & Poor's RatingsDirect research division. Hybrid ARMs have introductory interest rates that last a few years, and then the rate adjusts up or down annually. The most popular is the 5/1 ARM, with an introductory rate that lasts five years. The 3/1 ARM has been popular, too.

After a hybrid ARM has entered its annual adjustment period, the rate typically is indexed to the six-month LIBOR, a London-based money market rate. The six-month LIBOR has been falling. It was 2.38 percent this week, compared with 3.06 percent a month ago and 5.33 percent a year ago. That's welcome news, according to RatingsDirect. Borrowers with hybrid ARMs will suffer less payment shock when their loans adjust.

This is especially true, the RatingsDirect researchers say, for subprime borrowers, who will find that "the payment shocks are just a fraction of what they were just a few months ago." Alt-A borrowers with hybrid ARMs resetting now aren't seeing much of a payment shock, either, according to RatingsDirect.

Many borrowers got hybrid ARMs with the expectation that they would refinance their mortgages before rates reset. But many borrowers unexpectedly don't have the option to refinance, because their home values fell and they owe more than their houses are worth. Without cash to reimburse the bank for the difference, these borrowers can't refinance.