Given inflation and mortgage rates have gone up aggressively since August 2020, was getting an ARM back then a bad move? Maybe. But I’ll argue probably not. Let me reason why.
One of the best things about running Financial Samurai is having readers criticize my financial beliefs and actions. So long as the criticism is respectful, I find the criticism to be one of the best ways to learn. After all, if we’re stuck in an echo chamber, it’s hard to outperform.
Now that we’ve seen big rises in inflation and mortgage rates, I’ve received a couple of comments saying that I was wrong for sticking with my ARM recommendation call. It’s always easier to point out mistakes after the fact.
For reference, I’ve been writing about how an adjustable rate mortgage is preferable to a 30-year fixed rate mortgage since 2009, when the 10-year bond yield was at ~4%. I’ve actually held this belief since 2004, five years before I started Financial Samurai. Today, the 10-year bond yield is at ~2.85% after rebounding from a 0.52% low in 2020.
In other words, my public call to get an ARM and save on mortgage interest expense has been correct for at least 13 years. Could the 14th year in 2022 really be when I finally got my call wrong?
In the world of “what have you done for me lately,” let’s do some analysis!