The Fed move impacts short-term rates, thus interest levels for ARMs have declined. If the market changes, ARM rates can rise, an option not available to fixed-rate lenders. Still, the changes during the past week have been small and most borrowers will be pleased with the rates now in place. Because a larger loan amount is outstanding, lenders have more risk and so interest rates are somewhat higher than for conventional financing. Because the interest rate changes, monthly payments can also rise or fall.
Most ARMs have annual and lifetime interest caps, and also annual and lifetime monthly payment caps.
Interest rates are calculated at a given percentage of the loan amount per year, say 7 percent annually. Thus if a loan interest rate moves from 6.60 percent to 6.65 percent, it has gone up .05 percent or 5 basis points. Be aware that the rates presented here may not reflect the rates for individual loan products at any given time, and that rates are constantly in flux. At HomeAdvisor . Written by Realty Times Staff Click here for a printer-friendly version of this article.