Mortgage rates rose 0.53 percent to an average of 4.46 percent this week, marking the largest weekly increase in more than 26 years.
The dramatic increase in mortgage rates, combined with a 12 percent increase in home prices this year, has more consumers shopping for homes in fear that they won’t be able to afford to buy if they wait much longer. In addition, experts say more consumers are considering unconventional loans such as adjustable rate mortgages.
ARMs were popular before the financial crisis in 2008, accounting for 36 percent of mortgages in 2006. Today they only account for 4.5 percent, partly because of the bad press they got in recent years, but also because fixed-rate loan rates sank to all-time lows.
While ARMS are not nearly as common as they were in 2006, buyers who are concerned they will miss the boat if they don’t get in now and those who are trying to save deals as mortgage rates spike are more likely to choose an ARM.
Nevertheless, ARMs are harder to qualify for, and while fixed-loan rates have increased in the last four weeks, they remain below historic norms.
John Goodpaster is a mortgage broker at WJ Bradley Mortgage Capital LLC and can be reached at his website