![]() Home affordability is the worst it has been since 1984 (Amanda Andrade-Rhoades/For The Washington Post via Getty Images) Amanda Andrade-Rhoades/The Washington Post/Getty Images The geopolitical conflict following the Hamas incursion into Israel has led to higher oil prices, which act as inflationary, Cohn added.ĭUMFRIES, VA - AUGUST 13: Single-family homes with ample yards are seen in Dumfries, Virginia, on August 13, 2023. These economic data points “created shock waves through the market,” said Melissa Cohn, regional vice president at William Raveis Mortgage. Strong economic news over the past few weeks - a surprisingly robust jobs report and resilient consumer spending - has caused the Federal Reserve to suggest that its benchmark interest rate will remain “higher for longer.” Here’s why ARMs are getting a second look from some buyers.įixed rates will be ‘higher for longer’ as the Fed adjusts There are also caps on how much a rate on an ARM can go up or down during each reset period and over the life of the loan. Loans reset based on a reference index like the Secured Overnight Financing Rate or the rate on short-term US Treasuries. And while it may go down, it could also go up.ĪRMs offer a fixed rate for a set period - typically five, seven or 10 years - but after that, the interest rate resets to current market rates.Ī 5/1 ARM, for example, has a fixed rate for five years and then resets every year after that, while a 5/6 ARM is fixed for five years and then resets every six months. Now, stricter regulations and more transparency have made ARMs less risky than they used to be.īut they are still a roll of the dice, because your rate will not stay the same for the life of the loan. ![]() Leading up to the foreclosure crisis, home buyers signed on for teaser rates that then reset and caused monthly payments to balloon above borrowers’ ability to pay them. “With mortgage rates well above 7%, some prospective homebuyers are turning to ARMs to lower their monthly payment in the short term amidst these high mortgage rates.” “Mortgage applications increased for the first time in three weeks, pushed higher by a 15% jump in ARM applications,” said Bob Broeksmit, CEO of MBA. ![]() Mortgage rates continue to climb, hitting 7.57% An aerial view of homes in a housing development on Septemin Santa Clarita, California.
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