Interesting Article to Share: Are Fixed-Rate Loans About To Vanish?

[onewhippedpuppy]

Considering that ARMs one of the factors that has led to the huge number of recent foreclosures, it seems that favoring them would be foolish. Perhaps in conjuction with stricter lending practices it could benefit the lenders to some extent, but I would think there would always be an extra degree of risk if the rates adjust upwards. We didn't have this problem when EVERY loan was a fixed rate loan.

All of this nonsense makes me very happy that I have a fixed rate loan, locally held with a conservative small town bank.

[EdT82SC]

Most loan customers will want a fixed rate loans. The banks that don't give their customers what they want will not be the most successful ones.

[Porsche-O-Phile]

Exactly. I won't take an ARM - period. Under any circumstances. I don't like surprises and I'm willing to even pay a little more to know what the hell my payment is going to be every month.

If I can't get a fixed from one lender, I'll go somewhere else. It matters not to me who I write the check to.

[cl8ton]

If fixed rate is going away, what would they replace it with?
Lenders will use higher up front points to hedge fixed rates going forward IMO

Like the rest said, I will never use an ARM!

[jyl]

Lenders and mortgage investors can hedge currency risk with a currency swap, and can hedge interest rate risk with a fixed-to-floating swap.

This is routinely done.

The additional cost which has to be reflected in the fixed rate mortgage is simply the cost of the swap, which is not much.

[daepp]

When and if the markets get their act together, it should continue to work like this:

Good loans with real down payments to good borrowers will be packaged together and sold. These can be fixed rate loans. Stable entities such as insurance companies that need a safe investment and who have similarly written fixed rate contracts over long periods of time will purchase these investments.

Businessmen love stability. It really matters not what actual rates we're talking about - rather, what we need is a rate and an investment and a spread we can count on. It worked well for a very long time, until greed, Congressional pressure and cheap money took over.

[RPKESQ]

Lendors could offer mortgages like what some European lenders do. If the interest rate goes up the monthly payment remains the same only the term changes. This works in reverse too.

[strupgolf]

Around here, most banks are stable and in good shape. Fixed rates are not going away any time soon, at least from what I hear. (in central indiana)

[red-beard]

I guess I only have 29 years more until I need to worry about it...