For those of you who’ve wisely taken out adjustable rate mortgages (ARMs) over the past 10+ years, pat yourself on the back. You’ve saved plenty of money by paying a much lower interest than if you took out a 30-year fixed mortgage. Getting a 30-year fixed mortgage has not been a financially optimal choice because most people sell after 7 years and the 10-year bond yield has been going down for the past 30+ years.
Even with the Fed finally raising the Fed Funds rate in December 2015, mortgage rates for NEW mortgages have declined by about 0.5% because the Fed doesn’t directly control mortgage or consumer lending interest rates. The market does. And right now, investors are piling into Treasuries due to fears of a global recession.
For anybody with an ARM mortgage, you need to read this post and refinance before your interest rate adjusts. Before December 2015, the Fed hadn’t raised rates since 2004 (see pic). As a result, most ARM holders blissfully saw their interest rates adjust flat to lower once the fixed period was over. Not any more!