Less People taking ARM Mortgages

According to an article on CNN Money less people are taking out ARM mortgages which is very good news, if you ask me!  The bad news out of this is the reason less people are taking out these nasty ARMs is because so many have already been burnt by them.  These Adjustable Rate Mortgages are nasty little things that are supposedly the result of the double digit interest rates seen at the end of the 70s and the beginning of the 80s.  Now, I’m not quite old enough to remember those rates myself, but I am old enough to have heard many folks who lived through them gripe about them.  Some blame former President Carter; others blame former President Reagan, and my economics textbook a couple years ago blames the oil shocks of the early and mid 70s.

Hmmm, oil shocks… as in the price of gasoline and petroleum products went sky high (for the time) when OPEC slapped the embargoes on us.  Now, we’re not the target of an embargo, but the price of oil has been going up and up in recent years.  If there really is a correlation between oil prices, inflation, and interest rates then it only stands to reason the interest rates would start rising too. 

So, many mortgage lenders used the “teaser rate” to draw customers in.  And some talking heads on the TV and various pundits in print and on the web have said the amount of these teaser rates expiring has triggered the mortgage meltdown - as I have been seeing it called - because the ones who get roped into creative financing are usually the very people who cannot afford the payments when the teaser rates expire and the interest rate adjusts.

All the bad news in recent months makes me glad I got “ripped off” as some call it with a VA Loan mortgage at 7.25% interest, fixed rate.  If I recall correctly, VA loans are never allowed to do ARMs.  However, they ARE allowed to do zero-down, and roll closing costs into the mortgage, which is what I did because back in 2001 I didn’t know as much about mortgages as I do now and went with the advice I was given.

Now, for the disclaimer: I am definitely not an expert on the subject of mortgages.  I’ve made a few mistakes myself, and the above is just my personal opinion on the current mess that has been dubbed the subprime mortgage meltdown.  For all I know, I could be full of it LOL but that really won’t change my opinion that less people taking out ARMs is still a good thing!