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Popularity of adjustable rate mortgages on the rise

Posted by The Aramco Group on Sat, Oct 7, 2017 @ 14:10 PM

With home prices continuing their gradual increases month after month, buyers are seeking out ways to work a mortgage payment into their monthly budgets. As a result, the number of adjustable-rate mortgage originations has climbed significantly this year – 40 percent since the first quarter. This latest data comes from an analysis by Inside Mortgage Finance.

Adjustable rate mortgages (ARMs) offer buyers lower interest rates than a fixed-rate loan but after a fixed period of at least five years, can be subject to change. Because of this caveat, ARMs are typically considered risker than a traditional 30-year fixed mortgage. Depending on the condition of the overall market and economy, rates can suddenly move higher, resulting in increases in monthly payments.

Since the Great Recession, buyers have gravited more toward classic fixed loans but recent affordability struggles are making ARMs appear more appealing to buyers looking for a lower monthly payment. Currently mortgage rates are near historic lows with conforming no-point 30-year fixed mortgage rates averaging 3.875 percent while 15-year rates are near 3.25 percent.

Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.