What if Mortgage resets are at lower rates?
This is strictly my own story and observation, but I have not seen any argument to this effect in the financial news so I thought I would throw it out. As the Fed cuts interest rates, the rates for those with adjustable rate mortgages may not see their payments go up, or they even my decrease. I will use my mortgage as an example.
I took out an ARM in November 2005 with a 3 year rate of 5.0%. After the 3 year period the rate will reset at a rate approximately 2% over the 1 year LIBOR rate for the next 12 months. With the 1 year LIBOR currently at about 2.5%, if my mortgage reset today my rate would actually fall.
I am hoping the Fed cuts rates a little more and they stay low until at least December, when the rate will reset. Nothing wrong with a lower mortgage payment!
I know there are a lot of mortgages with lower initial rates than mine, but I was getting quotes closer to 6% three years ago, so 3 year ARM mortgages started at those rates should definitely reset lower in the current rate environment. Rates were quite a bit lower in 2002-2004, but the common 3 or 5 year rate locks on those have long run out and those mortgages should be resetting once a year with relief coming for those still making their payments.
My light weight analysis leads me to believe that foreclosure rates should slow on ARMs, as rates are reset lower than the current payment for many mortgage holders.
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[...] Tim Plaehn contemplates the unthinkable! What if the Mortgage Resets are at LOWER Rates? [...]