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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: Pogeu Mahone who wrote (7449)6/3/2004 2:18:37 PM
From: mishedlo  Read Replies (1) of 116555
 
The shift to ARMs is also being driven by higher home prices. One sign: Much of the growth in ARM usage is coming from borrowers taking out jumbo mortgages, as loans above $333,700 are called. More than 40% of borrowers with jumbo mortgages hold adjustable-rate loans, according to Fitch Ratings, up from just 18% two years ago.

realestatejournal.com
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This response from Tiny on the FOOL....

Not to sound too cynical, but is seems as though the entire world is wedded to one gigantic interest-rate arbitrage. The home buyer has considerably more leverage than only two or three years ago and is essentially betting that the added debt/equity will be offset by continual low/benign interest rates. The financial institutions, who are holding these loans as assets on their books, have themselves expanded their leverage enormously; financial sector debt is at an all-time high both relative to GDP and relative to the total amount of debt outstanding. If that were not enough, we can also see that, according to the official OCC data, interest rate derivatives are not only the largest composition of derivatives outstanding (87 percent of notional total) they are also growing at an annualised pace of 20 percent (commercial bank assets are growing at less than half the pace).
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