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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: mishedlo who wrote (4024)4/9/2004 2:28:48 PM
From: DOUG H   of 116555
 
The way for homeowners to borrow close to 1% is to finance their home via an adjustable rate mortgage geared to the short rate.

I have an ARM who's index is 12 mo average of 1 yr T's. W/ margin, my rate is 4%. Those T's need to go to 3% AND be there 1 year before I match a 6% fixed rate. Till then, it's gravy over fixing now.

I take the opposite view by recognizing that a 15-year mortgage, which is longer than most homeowner’s horizons anyway, comes with yields 50 basis points or lower than the 30-year alternative.

This would be driven somewhat by household cash flow but if you could make the ratios work a shorter amortization period reduces LT risk to the lender and results in a better rate.

Presently it appears to be around 1/2% better.

monstermoving.monster.com
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