Adjustable Rate Loans Hit Record
Borrowers continue to defy logic by seeking adjustable rate mortgages (ARMs) when rates are expected to rise. From the Washington Times, "Mortgage Bankers Association showed 36.6 percent of mortgages, including refinancings and new purchases, had adjustable rates as of last week, which is a record. The figure was more than 3 percentage points higher from the prior week and 9 percentage points above a year ago."
The article speculated that the move into ARMs was a response to higher prices. "With housing prices continuing to rise in many areas, buyers seeking to keep payments low are opting for ARMs."
"Economists fear some of these homeowners, who are already financially stretched, may get into trouble if interest rates rise and their payments go up when their fixed-rate period ends, typically in one to seven years."