Home Buyers Re-ARM as Fixed-Term Rates Rise
Adjustable-rate mortgages are gaining in popularity again now that interest rates on fixed-rate mortgages have increased to between 10 1/2 and 11 percent, housing economists reported this week.</br></br>With starting interest rates as low as 7 1/2 to 8 percent, adjustables are expected to take up a larger share of the market as long as fixed-rate loans continue to be priced above 10 percent.</br></br>"Most people should take a hard look at ARMS in today's interest-rate climate," said Thomas A. Lawler, vice president and senior economist for the Federal National Mortgage Association, which buys mortgages from lenders for resale into the secondary market.</br></br>"For many people an ARM is a good deal right now, particularly if you know you are going to be moving again within the next five years," Lawler said. "ARMs are priced low enough below fixed-rate loans to make them very attractive. Their popularity is only going to increase."</br></br>ARMS, which were introduced by lenders in the early 1980s as an alternative to high-interest fixed-rate mortgages, have waxed and waned in popularity as rates on fixed-rate loans have fluctuated, with adjustables always gaining in popularity when rates on fixed-rate loans increased.