Milwaukee Condo & Real Estate Scene

Short-Term Interest Rates on the Rise: ARM Holders Prepare for Increase in Interest Rates

Kevin Kowalke, Mortgage Consultant & Co-Owner of KLM Mortgage, Inc.

Interest rates are on the rise and many home-owners, who have adjustable rate mortgages, may see increases in their forthcoming annual adjustments.

Our current market reflects the reaction of investors reading between the lines on comments made by the Fed, and mortgage interest rates are going up. This will have an affect on home-owners with adjustable rate mortgages (ARMs) tied to indexes that are based on short-term interest rates. This includes the 11th District Cost of Funds, 12-Month Treasury Average (MTA), London Inter Bank Offering Rates (LIBOR) and others.

This doesn’t mean that everyone with an adjustable mortgage is in trouble right away. Some indexes are more volatile than others. COFI moves much slower than other adjustable rate indexes, while the LIBOR fluctuates with more volatility. But remember, when an ARM adjusts, the new interest rate is a sum of the borrower’s fixed margin plus the current rate of the index the mortgage is tied to.

Consumers who foresee paying an interest rate that is significantly higher may want to consider refinancing to take advantage of the stability of a fixed rate mortgage.

As with any decision to refinance, it is important to take the terms of the existing loan, the cost of the new loan, and the borrower’s long-term needs into consideration. As a qualified mortgage professional I can help weigh out the options by providing a clear assessment of available loan programs for any consumer.

Contact Kevin Kowalke at (414) 453-7620 for more information.

posted by David Ray @ 10:48 PM