‘Can’t Predict’
“Jamie Dimon can’t predict what will happen in five years,” said Westbrook, referring to the chief executive officer of JPMorgan, the biggest U.S. bank. “Neither can homebuyers who are thinking about getting an adjustable.”
Quicken Loans Inc. last week offered a 3.3 percent rate for an ARM with an initial fixed period of 7 years, after which it could adjust as much as 5 percentage points higher. Their rate for a fixed loan was 4.5 percent. JPMorgan offered a 3.3 percent rate for a five-year ARM and 4.4 percent for a fixed-rate loan.
In Los Angeles, Lim is happy to be locked at a 4.6 percent rate for an adjustable mortgage that is fixed for 10 years, about a percentage point cheaper than a loan fixed for 30 years, he said. Leah Guerra, the agent with Rodeo Realty who is helping Lim with the purchase, said using an ARM is a calculated risk that pays off when it’s right.
“It’s a bet that prices will appreciate, that your income will stay the same or increase and that rates will stay stable,” Guerra said. “It’s a bet that confident people make.”