3 ms·

So since it seems like under this system, the lender carries most of the downside risk on interest rate movements while the borrower gets the upside, the lender

by caf 7y ago

So since it seems like under this system, the lender carries most of the downside risk on interest rate movements while the borrower gets the upside, the lenders must be covering this with a greater spread between their cost of borrowing and the fixed interest rates they charge?

toast0 7y ago
Usually yes; the rate for fixed mortgages tend to be higher than adjustable. Looking at rates today, I'm seeing about 3.75% for a 30-year fixed; 3.125% for 15-year fixed, and 4.25% for a 5/1 ARM; but it's more typical in my experience for an ARM to come in near or below the 15-year fixed rates.