Mortgage Rate Adjusting? You May Be in for a Surprise...
By Kevin Sandridge, Winter Haven Mortgage Broker
(Signature Home Funding)
For Winter Haven and Polk County, FL homeowners with soon-to-adjust adjustable rate mortgages, the recent banking turmoil worldwide may lead to budgetary pain. This is because most conforming ARMs made since 2003 are based on a borrowing cost called LIBOR and LIBOR is up an uncharacteristic 2 percent since September. LIBOR stands for London Interbank Offered Rate and is the rate at which banks lend money to each other. Historically, LIBOR has tracked the U.S. treasury market, plus a half-percent increase. This suggests that banks are only slightly less likely to default versus the U.S. government. Today, that spread is close to 4.5 percent. Since Lehman Brothers failed in September 2008, banks are fearful that their peers will meet a similar fate. Looking at the chart, we can see how ...
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