Posted on 02/15/2022 5:17:04 AM PST by Browns Ultra Fan
The US 30-year mortgage rate broke through the 4% barrier. According to Bankrate’s mortgage survey, the 30-year mortgage rate is now 4.2%.
Even more interesting is the 5/1 Adjustable Rate Mortgage (ARM) rate falling slightly to 2.87%. That is quite a spread between the 30-year fixed and 5/1 ARM rates! That is 133 basis points.
Broken ARMs??
(Excerpt) Read more at confoundedinterest.net ...
“Biden and The Fed have created a TOTAL MESS!!!”
Actually, rates going up is about the BEST thing they could do...only took too long.
Just wait, those ARMs are going to become untenable.
When my kids grew up one of the big things I taught them was if you have to borrow money ALWAYS do it under fixed interests.
All of them have in the last year thanked me for that advice.
People WILL be loosing their homes in the next 2 years because of ARMS.
They're going to have to come down at least 40% for me to want to move. That's when I become a cash buyer. Until then, I'm staying where I am, and IDGAF that my home will decrease in value. It won't be anywhere near what single family homes decrease and it won't get to the money I paid for it either.
Win-Win for me.
4.2% fixed rate is still very low. Wall Street still believes long term inflation will be under 2% per year.
If you expect it to be higher there is easy money to be made simply by taking out another mortgage.
I agree, we need a missive rate hike, yes it will crushing but we are at a crossroads, pay now and suffer or pay later and suffer WAY worse.
Even more interesting is the 5/1 Adjustable Rate Mortgage (ARM) rate falling slightly to 2.87%.
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The banks are baiting the public into ARMs with a low rate with a good bet that in 5 years the ARM will adjust up to then higher rates. It’s like an echo replay of 2007.
Extremely cheap compared to the interest rate on my first mortgage in 1980.
Exactly, the bank analysist see what is coming. Like fishing to them. The are reading the patterns and making their catches.
“4.2% fixed rate is still very low.”
Not with current home values bid up to 2.75 to 3% rate prices.
Your 1980 house was priced for a 12% rate.
“The banks are baiting the public into ARMs with a low rate with a good bet that in 5 years the ARM will adjust up to then higher rates. It’s like an echo replay of 2007.”
I never look at this from that point of view. Good observation.
Folks here who are looking for steep rate hikes are likely to be disappointed. The U.S. economy simply isn’t well positioned for that scenario, mainly because DEFLATION is a much bigger threat than most people seem to realize.
My 1980 rate was 13% due to job change. Left an 8% mtg. Could barely afford bottom rung home. Refied that loan at 9 in 83 I think. Happy to now have zero percent as in no mtg.
I would never recommend anyone roll the dice on an ARM unless they are prepared to pay the max rate in time. Much of the run up in prices were people bidding up prices based on very low mtg rates because of leverage.
In 1981 we acquired a mortgage with a 12,9% rate. It was considered a steal at the time
Yes, but your house was probably 1/10 todays price.
Once the fixed portion of the loan was over (it was a 5/15) in 2020, the interest rate increased by 2%. I immediately did a loan modification and fixed the rate for the remainder of the loan.
-PJ
Yup, sucker bait for those still wanting a mini mansion on a beer budget/income.
When fixed rates rise people move to ARMs. I’m a former mortgage broker and FNMA underwriter and I’ve been riding an ARM for 20 years. The rate has never exceeded 4.5%. Right now I’m at 2.75%. The house has increased in value $185,000 which we are getting ready to sell and take that profit with no tax penalty. When I bought the house I put zero down. Where else can you invest nothing for 20 years and realize $185,000 in profit? ARMs have their place in the market you just have to know hoe to use them.
Extremely cheap compared to the interest rate on my first mortgage in 1980.
Seriously! We were happy to get 12.75%
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