“Why do home buyers keep taking out 30-year fixed loans if they’re no longer a good deal?
And arguably even a bad deal at this point.
The 30-year fixed is now close to its 50-year average of ~7.75%.
If folks don’t expect to keep these loans for more than a few years, why are we not exploring alternatives?
I get that the 30-year fixed was a no-brainer for much of the past decade, but not anymore.
There are options such as a 5/6 or 7/6 ARM, which offer a fixed interest rate for 5-7 years before first adjustment.
And they come with rates that are anywhere from 0.50% to 1% lower than the 30-year fixed.
If they became more mainstream, competition would likely increase this discount even more.
Instead, it’s just more 30-year fixed-rate loans at 7% that nobody expects to keep.
Yet they’re paying the premium for the security of no rate adjustments during the loan term.
If these higher rates truly are the new normal, it might be time to roll out alternatives.”
Why do home buyers keep taking out 30-year fixed loans if they're no longer a good deal?
And arguably even a bad deal at this point.
The 30-year fixed is now close to its 50-year average of ~7.75%.
If folks don't expect to keep these loans for more than a few years, why are we…
— Colin Robertson (@mortgagetruth) January 6, 2025
30-Year Treasury Yield jumps to 4.85%, the highest level in more than 14 months 🚨 pic.twitter.com/ytzZ5ydlam
— Barchart (@Barchart) January 7, 2025