Adjustable-Rate Home Loans Hitting Records

A record 63 percent of all mortgages written in the latter half of last year were adjustable-rate and interest-only loans, the Mortgage Bankers Association calculates.

A drop in refinancings has prompted many lenders to offer such products first, boosting their sales volume. American Bankers Association spokeswoman Heather McElrath says adjustable-rate and interest-only mortgages enable buyers to make home purchases at a time when soaring prices make them unaffordable through conventional means, adding that most homeowners re-sell their dwellings before the higher payments kick in.

However, MBG Information Services President Charles McMillion believes regulators should be troubled by the popularity of such loans, as homeowners could face financial turmoil when interest rates rise.

Source: Washington Post (06/03/05); Downey, Kirsten