We’ve been talking about the impact of resetting ARMs, something like $2 trillion in the next 18 months nationwide. And in another thread, Deadzone wrote “The climate is much different now than 1996 with so many mortgages of the ARM variety. The ARM resets should begin in to have a major impact in the next year.”
We have not discussed the impact of increasing interest rates on piggyback loans and HELOCs. The amount of those is possibly higher, and I wonder how many people will be able to make those payments once they double?
“‘Borrowers are reacting to both incentives to cash out home equity through refinance and incentives to change their mortgage as they hit an interest rate adjustment. Freddie Mac estimates that $500 billion in first lien mortgages will adjust this year and another $650 billion in second liens will see at least one rate change this year, said Frank Nothaft, Freddie Mac chief economist.”
We have not discussed the impact of increasing interest rates on piggyback loans and HELOCs. The amount of those is possibly higher, and I wonder how many people will be able to make those payments once they double?
HELOCS are a little different – they are lines of CREDIT and hence more like a credit card, but with a lowish rate. The HELOC rates have been going up since Easy Al started raising rates. Mine did anyway! Before I dumped it for a HEL (Home Equity Loan) at a fixed rate.
HELOCs were tempting a couple of years back because they offered tons of money at 4% APR. That was better than most auto dealers could give you, and it was tax deductible! Once the rates started going up, it’s another story!
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