Floating (ARM) rate mortgages are on the rise

CalculatedRisk has created a lovely chart of the rise in popularity of Adjustable Rate Mortgages in the USA. It is scary is that around 30% of mortgages in the last few years are ARM’s.

This is bad as 1: ARM’s are easier for home buyers to get than fixed rate mortgages, indicating that the quality of the security is lower than historical norms, and 2: these mortgages are sensitive to increases in interest rates.

1: means there is a housing bubble, and people are buying with funny loans. 2: means when the bubble bursts then the effect is going to be more dramatic than desired.

Sell investment property. Now.

calculatedrisk - ARM popularity

Published by Lance Wiggs