The Colorado Springs Gazette final

Homebuyers turn to adjustable-rate mortgages as rates rise

By Alex Veiga; Jenni Sohn

Rising interest rates are making adjustable-rate mortgages an increasingly attractive alternative to common 30-year, fixed-rate home loans.

ARMS made up 13% of all home loans by dollar volume in March, their highest share since January 2020, according to Corelogic.

The increase follows a sharp rise in mortgage rates. The average rate on a 30-year mortgage slipped to 5.25% recently from 5.3%, the highest level since 2009, according to mortgage buyer Freddie Mac. The average rate was 3% a year ago.

ARMS don’t make it any easier to qualify for financing, but they offer buyers flexibility with their monthly payments for a few years.

Such loans became less attractive the last couple of years as average long-term mortgage rates fell to an all-time low.

ARMS’ share of all loans by dollar value sank to just 4% in January 2021 from 13% a year earlier, according to Corelogic. ARMS have made up roughly 10% to 19% of all home loans by dollar value over the last 12 years.

“It’s natural for homebuyers to be looking at ways to reduce that mortgage payment, and one of the ways is to use an adjustable-rate mortgage,” said Selma Hepp, deputy chief economist at Corelogic.

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2022-05-29T07:00:00.0000000Z

2022-05-29T07:00:00.0000000Z

https://daily.gazette.com/article/282823604805595

The Gazette, Colorado Springs