AgentMortgage

Does Greenspan favor adjustable mortgages?

Learn why so many Americans buy fixed loans instead

Learn the New Luxury Playbook at Luxury Connect | October 18-19 at the Beverly Hills Hotel

"I wonder what you thought of Fed Chairman Greenspan's statements that mortgage borrowers could save a lot of money if they opted for adjustable-rate mortgages (ARMs) rather than fixed-rate mortgages (FRMs)." While Greenspan's remarks were carefully hedged, he certainly seemed intent on conveying the view that more borrowers should select ARMs. He made two arguments, neither of which withstands close scrutiny. FRM borrowers could have saved a ton of money over the last decade had they chosen ARMs instead. This is certainly true but has no implications at all for what borrowers should do now. Interest rates declined during much of the previous decade, but could rise during the next decade; we just don't know. My last mortgage, an FRM, was taken out in 1978. Because mortgage rates roughly doubled over the three years that followed, I saved a ton of money compared to those who took ARMs at the same time. I took the FRM because I was cautious, not because I was smart. The rate differe...