"John A. Weeks III" john[at]johnweeks.com, you responded:

<< <i> <Why does it seem people are so obsessed with a 30 yr. fixed rate?

- quote -


Mortgage rates are at historic lows right now. The only way that a variable
rate can go is up. Most people borrow right up to the limit of what they are
allowed to buy, and having the payment go up by any ammount will cause any
number of home loans to blow up. It is far less risky to lock in a good fixed
rate right now, and not have to worry about rates for the next 30 years.</i> >
Hmmmm??? So, you're suggesting that paying something like an additional 150
basis points each year over 30 years is a good buy?

I would suggest the issue is not this simplistic. Yes, we're at historic lows
and yes, rates are likely to rise. But how much are they going to rise and how
quickly? The fear seems to be that the rates will rise quickly over a short
period as they did when most ARMs were tied to the prime rate. Given how ARMs
are structured today, that kind of volatility is not necessarily present any
longer.

Certainly, if people are borrowing up to the limit they can borrow under an
ARM, there's substantial risk as you've pointed out. But if they can qualify
for a 30 yr. fixed on 80% of the value, they're not putting themselves at that
kind of risk using an ARM and can use the difference more effectively
elsewhere. When looking at 30 years or the long term however you want to
measure that term, essentially we're dealing with interest rates that move
inversely to the stock market. . . .and what do you expect the stock market to
do over the long term?

Also, given how long people are so mobile today and don't live in one place for
much more than 7years or less on the average, not having to worry for the next
30 yrs just doesn't seem logical. Yes, there are many expectations to the
rule. But over all, I'm suggesting that 30 yr. fixed rates are oversold and
not much thought is going into deciding just what kind of mortgage is really
the better financial decision. Note too that a lot of this also has to do with
people's feelings rather than the logic.

In article <20040331100546.17857.00000414[at]mb-m21.aol.com> , TTRoberts
<ttroberts[at]aol.com> wrote:

- quote -

Mortgage rates are at historic lows right now. The only way that
a variable rate can go is up. Most people borrow right up to the
limit of what they are allowed to buy, and having the payment go
up by any ammount will cause any number of home loans to blow up.
It is far less risky to lock in a good fixed rate right now, and
not have to worry about rates for the next 30 years.

-john-

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John A. Weeks III 952-432-2708 john[at]johnweeks.com
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