This is a YouTube video titled "Fixed Rates vs ARM’s 💪" containing an explanation about the differences between fixed rate and adjustable rate mortgages (ARMs), how they trade independently based on economic factors, and the impact of inflation and Federal Reserve interest rate changes. The content is educational and focuses on mortgage rate behavior as of late 2022.
I think many people are familiar with fixed rates versus arms or adjustable rate mortgages. But did you know they trade independent of one another? Meaning the rates can go up and down differently based off of different things happening in the economy. What I mean by that? So a fixed rate, even if it's a 15 or 30 year term, we understand the person's just going to have it for, you know, five, six, seven, eight years before they refinance or sell the house and buy another one. That's still considered a longer term investment. So it trades off of longer term indicators like inflation. So when inflation goes up, fixed rates go up. When inflation goes down, fixed rates go down. ARMS or adjustable rates, that's a short term mortgage. Generally it's three or five years that that teaser rate is locked in for. So the economy understands in the next couple years this person is probably going to refinance out of this if they don't sell the house already. So they understand this needs to trade off of shorter term type things. So what other type of loans are three or five years? That's credit cards or short term auto loans. Are you in that time frame? So arms trade more along the the same lines as an auto loan or a credit card, which that follows the Federal Reserve's interest rate. The Fed which has been raising rates, has been raising ARM rates. So inflation had pushed fixed rates up, but now it's bringing them down. The Fed keeps raising their rates, so arms are actually going higher. And in the current day, many ARM rates are actually higher than fixed rates which are starting to recover.
