If you don’t want to give up your dream of living in your preferred school district of Mountain Brook or Vestavia Hills, Alabama, consider an ARM loan to keep payments manageable. Last week, mortgage applications spiked by 5% over the previous week due to a minor increase in inventory and a fear of interest rates going higher. Having met with Anoop Mishra of the Federal Reserve this week at our corporate sales meeting, the representative’s opinion is that at least two more rate hikes are ahead in the near future. So, if you fear that you won’t be able to get into the pricier Birmingham areas such as Mountain Brook or Vestavia Hills , then finding an ARM (Adjustable Rate Mortgage) could put your favorite home back in reach. But the time to act is now, especially if you need to sell before you buy. Home Sellers will definitely be affected by the ability of Home Buyers to purchase. We are already seeing a slow down in higher end real estate transactions.

ARM and Fixed-Rate Loans This Week

The average contract interest rate for a 30 year fixed-rate mortgage with conforming loan balances ($647,000 or less) increased to 5.53%, up from 5.36% the previous week. Points rose from 0.63 (including origination fee) to 0.73 over the last week. The average rate on an ARM was 4.47%. This gives an advantage to the home buyers in Mountain Brook and Vestavia Hills, who may be trying to purchase a home with financing and keep the mortgage payment in their comfort range, without sacrificing anything else in their lifestyle.

Are ARM Loans on the Rise?

Overall, ARM loans increased to 11%, and to 19% by dollar volume, according to the Mortgage Bankers’ Association Index. This is the highest number of ARM loans since 2008, and a large increase from the 3% overall at the beginning of the year when interest rates were lower. Mortgage application demand is 8% lower than this same week last year, although the annual drop is now beginning to shrink. Things are changing quickly every day in the Birmingham, Alabama real estate market, as well as across the country.

According to Joel Kan, an MBA economist, “Despite a slow start to this year’s Spring home buying season, prospective buyers are showing some resiliency to higher rates. Purchase activity has now increased for two straight weeks. More buyers continue to utilize ARMs to combat higher rates.”

In Conclusion

If you feel that an ARM loan product may help keep your Vestavia Hills or Mountain Brook home on the horizon, be sure to investigate the advantages. Working with our preferred lenders and utilizing our expertise in the luxury market, we want to move you forward in life. The Shannon Holmes Team is here to help you make the best real estate investment decisions for you.

Photo by Curtis Adams