- Existing ARMs. Relief is on the way for homeowners with ARMs. The indexes used to make the annual adjustments to ARM rates follow short-term money market rates. A homeowner with a typical ARM would have had a new rate of 10% if adjusted last week, vs. 11% if adjusted six months ago. ARM holders whose rates will be adjusted next spring could see rates as low as 9.13%.

That 9.81% average rate doesn't reflect Friday's sharp decline in bond yields sparked by the bad unemployment report. Most lenders sell their loans to Wall Street investors through Freddie Mac or the Federal National Mortgage Association. The rates Freddie Mac and Fannie Mae demand from lenders are tied to bond market yields. By Friday afternoon, Freddie Mac had cut the rate announced on its telephone hot line to 9.6%. That means 9.63% mortgages will be widespread this week.

- New ARMs. Unlike fixed-rate mortgages, ARMs follow short-term money market yields, controlled by the Federal Reserve. The average first-year rate on ARMs has fallen quickly since the Fed began dropping short-term interest rates in the fall. It fell to 8.04% last week from 8.08% a week earlier and around 8.5% last summer. By next week, the average should break to less than 8% for the first time since August 1988.