Vince,
In the USA, they are always designing new mortgage concepts. However, the "standard" ARM (Ajustable Rate Mortgage) works something like this:
1) It usually tracks the 10 year Treasury bond
2) It has a two caps: a yearly cap, which only allows the lending institution to raise the rate by, for example 1% for each year. In other words, it interest rates were to go up 9% this year (for some ungodly reason.......), the lender can still only raise the rate over the course of 1 year 1%.
3) And a lifetime cap, which means that over the course of the full borrowing time of the loan, the institution can only raise the rate by, say 3.5% (in total!!).
Our ARM Mortgage works something like your system, and I can see what you mean if you can never LOCK your rate.
In contrast to a permanent Fixed rate (which.......BTW I have personally), it's locked at the time of closing, and doesn't change for the duration (usually 15 or 30 years). I did my rate at under 7%, and it won't change.....EVER. I never see my largest monthly expenditure change via interest rate changes. That's good for me and why I like fixed rate mortgages, IMHO. Over the years, I've attempted to re-negotiate my mortgage rates down as interest rates came down, and I think I did pretty well for my last go at it. Under 7% is pretty darn good (as well....I had no points, and no closing costs).
I did this in 1993, after seriously watching the market for 15 months, I jumped in and locked a new rate under 7%.
If your rates are being raised too (via AG's raising of the US rates....), then I can see that you will EVENTUALLY pay more. If your renewals are close at hand, you're correct.
If you just had a renewal, then you could miss this increase because by the time the next renewal comes around, rates should be lower and it would be a wash.
Regards,
Steve |
