by Alyssa Gerace Published in News, Reverse Mortgage
Lenders are offering new loan products that are a hybrid between fixed rate and adjustable rate mortgages, reports National Mortgage News.
Rising interest rates are making fixed rate loans less attractive, and lenders are hoping the new products will entice borrowers who like the stability of a fixed rate and the less expensive upfront fees of an adjustable rate.
TD Bank is among several lenders offering a 5/5 ARM that provides a fixed interest rate for the first five years, then adjusts once every five years for the rest of the 30-year loan term.
”We felt it was a product that made sense for our borrowers and obviously it is a way to differentiate ourselves,” Malcolm Hollensteiner, director of retail lending products and services at TD Bank, a unit of Toronto-Dominion Bank, told National Mortgage News.
While different ARM offerings are sparking conversation at mortgage trade shows, the article says, they’re not making up for much volume. A mid-April Mortgage Bankers Association weekly application survey indicated that ARMs accounted for 9% of all new loan applications, down 32% from the same time period 10 years ago.
Another lender, Pentagon Federal Credit Union, takes credit for inventing the 5/5, calling the offering its signature product. The Alexandria, Va.-based lender started offering the loan around Labor Day 2007, reports National Mortgage News.
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