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A call to ARMs: adjustable rate mortgages in the 1980s

Author

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  • Joe Peek

Abstract

Adjustable rate mortgages, long-term loans that provide for interest rate changes at regular intervals over their lifetimes, have recently become a major source of residential mortgage financing in this country. Today adjustable rate mortgages probably account for close to 25 percent of total home mortgage debt. ; While adjustable rate mortgages (ARMs) have grown to be an important factor in mortgage lending, their variety and complexity have led to confusion. This article discusses their advantages and disadvantages to both borrowers and lenders, and highlights the nature of the risks involved. The author concludes that while lenders have enthusiastically embraced the concept of ARMs, borrowers have been reluctant in their response, forcing lenders to provide low initial interest rates and restrictions on interest-rate movements in order to sell their product.

Suggested Citation

  • Joe Peek, 1990. "A call to ARMs: adjustable rate mortgages in the 1980s," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 47-61.
    • Handle: RePEc:fip:fedbne:y:1990:i:mar:p:47-61
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    File URL: http://www.bostonfed.org/economic/neer/neer1990/neer290d.pdf
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    Cited by:

    1. Cóndor Richard, 2019. "Measuring the cost of U.S. housing policy," Working Papers 2019-08, Banco de México.
    2. Patric H. Hendershott & Herbert M. Kaufman (ary), 1992. "The market for home mortgage credit: recent changes and future prospects," Proceedings, Federal Reserve Bank of St. Louis, pages 99-127.

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    Keywords

    Mortgages;

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