Adjustable-Rate Mortgages Are A Smart Move for Some, But Not All

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Adjustable-Rate Mortgages Are
A Smart Move for Some, But Not All

By Ruth Simon
From The Wall Street Journal Online

Mortgage lenders, looking to boost profits as the mortgage boom cools, are encouraging borrowers with adjustable-rate mortgages, or ARMs, to refinance into fixed-rate loans. It's a move well worth considering -- but carefully, because it won't make sense for everyone.

The rates on fixed-rate mortgages exceed those on ARMs by a narrower margin than they used to, because short-term interest rates have moved up faster than long-term rates. Currently, a 30-year fixed-rate loan carries an average rate of 6.39% versus 5.46% for a one-year ARM, which adjusts annually, according to HSH Associates. Some borrowers who took out ARMs in recent years are facing substantial rate increases.
-- February 14, 2006

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