KPLU’s John Maynard bought a condo in 2007 – at the height of the market. He took out an adjustable-rate mortgage that’s “adjusting” in June.
That’s turned out to be good news for Maynard, who’s mortgage payment will go down considerably since interest rates are low right now and expected to be so for quite some time.
Back in 2007, Maynard was worried that his mortgage payments would go up when his ARM expired. Remember, this was the top of the housing market when all we saw were housing prices go up, up, up. But today, with a softer real estate market and interest rates dropping like a roller coaster at Disneyland, it’s a great time for adjustable-rate mortgages to come due because they, too, have hit record lows[1].
What it is
Adjustable-rate mortgages can only be adjusted to 2 and 3/4th percent over the prime interest rate (hovering right now around 3 percent). Seattle-area real estate appraiser Richard Hagar says the prime rate is set by a lot of banks – together.
If consumers need more information on interest rates, Hagar recommends going to Bankrate.com[2]. At that site, you can check to see what the latest interest rates are for a 30-year fixed-rate mortgage, a 15-year fixed rate mortgage and adjustable-rate mortgages.
Plenty of need in Seattle
And in addition to individual buyers and sellers, Hagar says low interest rates mean a lot of action from developers, builders and real estate investors.
“They’re trying to buy more multi-family housing right now because people continue to move here – roughly 100,000 people a year to the state of Washington.”
Rental vacancy rates are also dropping[3], says Hagar, which makes the market more attractive to landlords, many of whom were having to charge rents that didn’t cover their mortgage payments and other costs.
So, all this should be good news for Maynard and others in his position. He’s looking at a lower mortgage rate with his adjustable-rate mortgage and good rental rates for his rental condo.
So what’s not to like?
“It’s getting too darn crowded around here,” he says. “Don’t get me started!”
“Street Cents” is a monthly feature exploring real estate trends in the Northwest. The feature is published here and airs on KPLU 88.5 on the first Tuesday of the month during Morning Edition, All Things Considered and on Weekend Saturday Edition. [4][5]
References
- ^ adjustable-rate mortgages to come due because they, too, have hit record lows (www.appraisalinstitute.org)
- ^ Bankrate.com (www.bankrate.com)
- ^ Rental vacancy rates are also dropping (www.kplu.org)
- ^ Street Cents (kplu.org)
- ^ airs on KPLU 88.5 (1.kplu.org)
