Cheap Mortgages Are Backfiring. Here's Who Gets Hit.
It's 2020. The 30-year fixed is around 3%. And some borrowers looked at that and said: not cheap enough. They took an adjustable-rate mortgage instead, a 5- or 7-year ARM with an even lower teaser rate.
Those bills are now coming due.
The numbers (ICE Mortgage Technology)
186,000 ARMs hit their first reset in 2027.
74,000 of them are 7-year ARMs from 2020. Their median payment is projected to jump about $1,066 a month.
The typical 2027 reset adds about $645 a month, or 24%.
Think about that. A homeowner paying $2,800 a month at 2.5% could be looking at a payment thousands higher once the loan resets into today's 7%-plus world.
What about Washington?
My rough estimate: somewhere between 3,500 and 7,000 Washington homes have mortgages resetting. Inventory is already up 20 to 30%. If even a few thousand of those owners can't refinance and have to sell, that's more listings hitting the market in 2027.
Is this 2008 again?
No. During the mid-2000s boom, ARMs were a much bigger share of new loans. Today they're about 11% of rate locks. Borrowers qualified more carefully, and Washington homeowners have a lot of equity. In August, Washington ranked 34th of the 50 states for foreclosures, at about 1 in every 5,905 homes (ATTOM).
During the financial crisis, our team had 144 active short-sale and bank-owned listings, with 180 more in the pipeline. Today we have one short sale. This isn't the sky falling. It's pockets of real pain.
What to do
If you have an ARM: know your reset date and your caps now, not the month it hits. Talk to your lender about refinancing options early.
If you used a 2-1 or 3-2-1 buydown in 2022: your rate has already stepped up, so check your current payment against your budget.
If you're buying: builders are offering big rate incentives right now, in some cases well below today's 30-year fixed. New construction is worth a serious look.
If you're feeling the squeeze: don't wait. You have far more options before you fall behind than after.
Questions about your mortgage or your options? Hit reply, or call us at (425) 249-0214.
— Anton