Starting the early 2000's there was a major switch from 30 year fixed rate mortgages to adjustable rate mortgages or (ARM's) . As home prices continued to rise there was a huge push to find ways to make mortgage payments more affordable, this led to the creation of new and exotic adjustable rate mortgage loan options. Many of these options includes interest only loans and loan that led to mortgage balances growing each month, these loan options led to a lot of foreclosures and left most buyers terrified of adjustable rate mortgages.
Move forward to today, with homes prices on the rise and mortgage rates at a 15 year high, buyers are once again looking for ways to bring their monthly mortgage payments down. This has led to the return of adjustable rate mortgages, however there is a big difference between the adjustable rates mortgages we saw in the early 2000's. Those usually featured a rate that was fixed for the first 2 years and would adjust every year after. Now we generally see rates that are fixed for the first 5, 7 or even 10 years. By locking your rate for at least 5 years before the first adjustment you can better predict your monthly payment and also have a better opportunity to refinance at a lower rate before that first adjustment. The new adjustable rates are especially good for homeowners who do not plan to stay in the home longer than 7-10 years. It doesn't make sense to out a 30 year fixed rates when you are not going to stay, considering that the adjustable can save several hundred dollars per month.
As you can see, after peaking at 8% in October, rates are now below , with the adjustable rates now below 6%. This is a considerable savings over what you would have paid in October.
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