Affluent shoppers turn to ARMs to get low rates
Affluent home shoppers are willing to accept the risk of a jumbo adjustable-rate mortgage in order to lock in at a 2.5% interest rate. Per The Wall Street Journal:
But borrowers are undeterred. During the first eight months of the year, 75%, or 5,656, of private jumbo ARMs that were originated for home purchases had a fixed rate period of just one year.
Experts say some of these borrowers are betting that interest rates won't rise much in the near future, especially if the economic recovery doesn't pick up. "They've heard that rates will rise so many times that they've become dull to it—it's like crying wolf. If it ever happens we'll deal with it," says Jack McCabe, a housing analyst in Deerfield Beach, Fla., who provides research reports to investors buying these mortgages.