Homebuyers Are Moving Towards ARM Loans

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Increasing numbers of homebuyers are opting for adjustable-rate mortgages, as rates on fixed-rate loans continue to rise. The portion of homebuyers choosing ARMs rose to a five-year high of 34.6% last week, and is expected to continue rising, according to the Mortgage Bankers Association.

Demand for ARM products has climbed this spring as average rates for longer-term fixed-rate loans have increased almost 100 basis points. ARM rates have also risen, but remain significantly below fixed-rate mortgages. Freddie Mac reported last week that average rates for one-year ARMs rose to 4.14%, still far below the 6.30% and 5.67% averages, respectively, for 30-year and 15-year, fixed-rate mortgages. Federal Reserve Chair Alan Greenspan, during remarks at CUNA's GAC, suggested that more homebuyers ought to consider adjustable-rate loans as a better fit for the financial situation.

Ed Roberts can be reached at eroberts cujournal.com.

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