Adjustable rates falling out of fashion
Adjustable-rate mortgages aren’t as common as they used to be, accounting for 28.8% of all mortgage applications, down from the peak of 36.6% in March 2005. This hopefully means:
- Buyers are starting to buy houses they can afford, instead of over-extending themselves and hoping that the appreciation will make up the difference
- Home prices are leveling off while wages rise, making homes more affordable to more people
Perhaps the most obvious reason for this though, is that according to Bankrate.com, the average interest rate of a fixed-rate 30 year mortgage is 6.15%, while a 5-year ARM’s average interest rate is 5.71%, a narrower gap than it used to be.
