ARMs Making Comeback as Mortgage Rates Rise

As the Federal Reserve embarked last year on what economists have predicted will be an ongoing program of interest rate hikes, Connecticut banks have since increased mortgages with adjustable rates — a major contributor to the Great Recession of 2009 when homeowners borrowed at lower, initial rates, then could not keep up with ballooning payments as interest escalated on a contractual schedule.

Adjustable-rate mortgages made up 22 percent of all mortgages outstanding in Connecticut as of June, according to a Hearst Connecticut Media analysis of ARM and overall mortgage data on file with the Federal Deposit Insurance Corp. That represented a 1 percent increase over the intervening year, despite the Fed’s Open Market Committee having hiked four times since June 2017 the federal funds rate that governs the interest banks charge their own customers for mortgages and other loans.

Of some 40 banks based in Connecticut, more than half reported an increase in ARM loans outstanding, with the overall total up 5.4 percent to $6.7 billion, with year-over-year differences stark in some cases


Source: mortgagedaily.com