Short term vs long term rates (fixed rate, interest, mortgage rates, rate) - Mortgages -Lenders, loans, financing, rates, foreclosures, short-sales, brokers, credit score, deed, lien, refinancing, borrowers - City-Data Forum

KB4 · 11-04-2007, 01:41 PM

How do lenders determine their rates for the short term vs the long term? One of the lenders I've been looking at currently has the same rate for 10-year ARM and 30-year fixed. I've never seen this before, the rate for the ARM has always been lower. To me this doesn't even make sense because I feel like who's gonna take the ARM if they can get the same rate fixed for 30 years. Does this mean that the lender is almost sure that mortgage rates will fall considerably in the next 10 years?

evilnewbie · 11-04-2007, 01:51 PM

No, the lender is betting that YOU will think that it is going to fall after 10 years but nobody really knows (it may rise and you can bet the banks are going to try and make it rise through the usual channels - corrupt policitians) and when everyone is going into fixed rate, they go back to their friends, the politicians, to lower the interest rate so everyone would go to ARMs. Oh wait, that's happening now. What a coincidence.

KB4 · 11-04-2007, 06:56 PM

Quote:

Originally Posted by evilnewbie

No, the lender is betting that YOU will think that it is going to fall after 10 years but nobody really knows (it may rise and you can bet the banks are going to try and make it rise through the usual channels - corrupt policitians) and when everyone is going into fixed rate, they go back to their friends, the politicians, to lower the interest rate so everyone would go to ARMs. Oh wait, that's happening now. What a coincidence.

I'm not quite sure I follow your logic.