Credit union first mortgage loans outstanding grew 18.2% during the
twelve months ending June 30, 2002. The $15 billion increase in first
mortgages on the balance sheet made up 57% of credit union total loan
growth. With the average 30-year fixed rate mortgage hovering around
6%, low rates have inspired much of this mortgage boom. But lower
rates mean lower yields for credit unions. Credit unions need to control
the amount of long-term, low-yielding loans they keep on their books.
Recent data indicates that many credit unions are shifting their first
mortgage lending focus to adjustable rate products to lessen the impact
of holding long-term fixed rate assets.
Credit unions, as an industry, granted 57.4% more adjustable rate
first mortgage loans in the first six months of 2002 than the same
period in 2001. By comparison, 34.4% more fixed rate mortgages were
granted in the first six months of 2002 than 2001. Adjustable rate
mortgages generally have an initial rate a couple percentage points
lower than a fixed rate, but over time the rate moves with the interest
rate market. If the interest rates begin to increase, credit unions
will reap more return from their adjustable rate loans because those
loans' rates will increase as well.
Listed below are the top 25 credit unions in growth in adjustable
rate first mortgages granted year to date growth as compared to
the same period in 2001 (based on all credit unions who had granted
at least $1 million in adjustable rate mortgages by June 2001).
The high growth rates of these 25 credit unions have resulted in
a dramatic shift in the mix of fixed and adjustable rate mortgages
granted, as the percentage of first mortgages granted that are adjustable
rate increased from 9.9% at June 2001 to 39.5% twelve months later.