Go Fixed. No Variable. Wait No, Fixed.

Today’s Wall Street Journal had an article about banks that are now encouraging home owners to refinance their variable rate loans with new fixed rate loans. Just last year these banks were telling customers how great variable rate mortgages are and how getting one is a no lose situation. Now, apparently the banks are telling the same people that variable rate mortgages are not all that great a fixed rate mortgages are the only way to go.


By RUTH SIMON
Staff Reporter of THE WALL STREET JOURNAL
January 31, 2006; Page D1

Hoping to ride a new wave of profits as the mortgage boom winds down, lenders have changed course and are targeting borrowers with adjustable-rate mortgages and encouraging them to refinance into fixed-rate loans.

Many lenders have been pushing adjustable-rate loans as a way for borrowers to keep their monthly payments down, stretch their budgets to afford a bigger house and use their home equity to get cash. Now, with short-term interest rates having moved up much faster than long-term rates, lenders are rediscovering the marketing appeal of fixed-rate mortgages. Currently, a 30-year-fixed rate loan carries a 6.27% rate, according to HSH Associates, while a one-year ARM, which adjusts annually, has a 5.39% rate.

Lenders such as SunTrust Banks Inc., J.P. Morgan Chase & Co. and U.S. Bancorp are using statement inserts and direct-mail solicitations to encourage borrowers with adjustables to consider switching to a fixed-rate mortgage.

More…(subscription required)