WASHINGTON — The percentage of homeowners taking out adjustable-rate mortgages hit a record last week, a milestone some economists say might one day spell trouble for financially stretched consumers.
Some 36.6% of mortgages, including refinancings and new purchases, had adjustable rates last week, the Mortgage Bankers Association said Wednesday. That's up more than 3 percentage points from the prior week and 9 percentage points from a year ago.
The ARM portion was the highest since the group began collecting the data in 1990. The next-highest percentage was recorded more than a decade ago.
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That could also cause problems for the economy if consumers, whose spending accounts for more than two-thirds of U.S. economic activity, are forced to pinch pennies to pay mortgages, or to default.
"While ARMs buy home buyers some relief in housing affordability in the short run, the longer-run implications ... can be negative," says Celia Chen, director of housing economics at Economy.com.
Other economists say the increase in adjustable-rate mortgages is not cause for concern. Homeowners have grown more savvy and likely would refinance to lock in lower rates if they saw rates skyrocketing. Many ARMs are capped, so interest rates can only increase so much each year, and eventually hit a ceiling.
William Hummer, chief economist at Wayne Hummer Investments, also notes mortgage rates are unlikely to soar to the double digits they hit in years' past.
http://www.usatoday.com/money/perfi/housing/2005-03-30-arms-usat_x.htm:puke: :puke: :puke:
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