More than 30% of new loans are Adjustable Rate Mortgages (ARMs).

Two years ago congress projected a $5.5 trillion surplus. At current spending levels our country is faced with a $2 trillion dollar deficit spread out over ten years. This is disastrous! Economists have said that a perpetual $200 billion dollar deficit could drive interest rates up by 2% or more. This doesn't bode well for the housing boom.

More than 30% of new loans are Adjustable Rate Mortgages (ARMs). ARMs allow home purchasers to have a very low initial interest rate that increases over time. ARMs typically match LIBOR interest rates. When interest rates are down, ARMs are great. Unfortunately, interest rates fluctuate with the whims of current events. Current events such as war, deficit spending, weak U.S. dollar, and/or a recession, negatively impact interest rates. Primarily affecting homeowners with ARMs and new home purchasers.

There is no Federal Reserve bailout on the horizon. They have lowered the rates to a 41-year low of 1.00%. Altogether, this means that over the next year ARMs homeowners will have to deal with increased mortgage payments of 50% or more.

Noble DraKoln is the author of the best-selling books Futures For Small Speculators and Single Stock Futures For Small Speculators, available on http://www.amazon.com. He is also a well-known Southern California educator through his Small Speculators investing seminars. He has been a futures investor, broker, and analyst for almost 11 years. You can subscribe to his free monthly newsletter at http://www.liverpoolgroup.com.


"Reprinted from Zongoo! Finances".