For most of this year, nine out of ten homeowners with Adjustable Rate Mortgages (ARMs) facing their first adjustment opted to swap into a fixed rate loan. This was a reflection of the wide spread between what the post-adjustment rate would have been (most likely more than 7.5 percent) and the rate on a 30-year fixed loan (around 6.25 percent). As the bond market has backed up in recent weeks, however, the fixed rate mortgage isn’t looking quite as appetizing to some at 6.75 percent. If we sit down rationally, we’ll see the rates are historically very, very low still, said Melissa Cohn, Manhattan Mortgage CEO. But we’re a greedy crowd. In general, according to Cohn, those buying and refinancing in the hottest markets more likely to roll the dice with an ARM than their counterparts in more lethargic markets. Have any readers had to struggle with the ARM vs. fixed decision in the last couple of weeks?
Tough Choice: ARM or Fixed-Rate? [NY Times]