ARMs or adjustable rate mortgages have been the mantra for the home buyer for some time now. With short term interest rates having been as low as 1.5%, ARMs were very attractive and customers even chose riskier versions of ARMs like interest only payments, amongst others. Never had the consumer expected that home loan rates will cross six percent. Another Fed hike, though, unexpected, can make these rates close to seven percent.
In order to hedge the risk of increasing interest rates, customers are now showing an increasing preference for fixed rate loans. Fixed rate mortgages may be of tenures from 15 to 30 years, with the 15 year mortgage carrying more attractive rates. Fixed rate mortgages are also becoming increasingly attractive because the spread between ARM and the former has decreased considerably.
