Discussion in 'Economics' started by ShoeshineBoy, Apr 8, 2004.

  1. Variable rate mortgages are the norm in the UK and always have been (I think these are the same as ARMs). Even those who opt for fixed rate normally only fix for 2-5 years. The govt. is currently exploring ways of promoting long term fixed rates.

    I guess variable rates make the consumer & house prices more sensitive to interest rate rises. There was a while around 10 yrs ago when house prices fell to the extent that a lot of owners owed more than the value of their house.
  2. gms


    Adjustable rate mortages are attractive under certain scenarios. For example, such a mortgage with an initial period of 5 or 10 years where the rate is locked in and does not change is attractive to someone who intends on moving by then. The initial rate is usually very low, and that keeps their payments to the low end of available mortgage rates for their period of occupancy.
  3. Didn't know they could stay locked for that long. But that means that realistically a lot of Americans will be nearing the end of their "locking period" in the next few years I would guess. That with rising oil prices would certainly put the big squeeze on 'em...
  4. That's interesting. But are interest rates at bottom basement prices like they are here? And have you guys experienced the price acceleration of the major american realty mkts?

    (Sorry, I'm ignorant of the UK's financial situation!)
  5. UK house prices, according to some commentators, are in bubble territory.

    UK Rates have had their first tick up from a very low base (lowest in around 30-40 yrs, I guess).
  6. bgp


    its another smooth move by greenspan to keep the consumer borrowing at lower rates to keep the economy afloat. remember the consumer accounts for 66% of the economy.
  7. bgp


    the consumer can tap more equity that way. i needed to insert that part.
  8. Turlo


    Interest Only Arms have been good in the following scenario's

    The person that moved to an area for say 2 years and would like to buy (rather than rent) speculating that the property will appreciate. Most of the monthly payments (on fixed rate mortgages) in the first 5 years pay off interest not principle and most people do not live in their homes for more than 5 years.

    You own an investment property that you will sell in the near future and you would like to squeeze some more cash flow out of it for a couple of years before you sell it.

    The fact of the matter is fellas, like it or not the real estate market has been the place to be over the past 4 years. As a speculator (which i assume most of us are on this board) ARM's offer a great tool to leverage what money you are willing to invest.
  9. bgp


    true turlo, but your average person which is the majority, goes to extremes and borrows more from there equity to take a vacation, buy a new car,etc...ect... 20 years ago or more would you have thought of increasing your mortgage? or paying it down? now we have banks advertising to take out seconds for that well deserved vacation or buy that new car, all for self gratification. remember times don't change people do. just read ecclesiastes in the book knowledge.
    #10     Apr 9, 2004