Mortgage rates have stayed high since 2023 while home prices reached record highs, making homeownership difficult for many millennials and Gen Z buyers. A large share of younger buyers are taking adjustable-rate mortgages (ARMs) or planning to refinance later, betting on substantial mortgage-rate declines within a few years. A Truework survey found about two-thirds of recent younger homebuyers expect major rate drops and are basing decisions on that hope. ARMs offer lower initial payments but adjust based on market indices and margins, potentially leaving borrowers financially stretched if rates rise or refinancing options vanish.
Mortgage rates have remained elevated since 2023 and home prices are at record highs, locking out many millennials and Gen Z buyers from the housing market. A significant portion of younger homebuyers are betting on future rate drops by taking on adjustable-rate mortgages or planning to refinance, but experts warn this is an unreliable gamble. Although mortgage rates peaked at 8% in late 2023, they remain relatively elevated at about 6.5%.
In fact, a new survey of 1,000 Americans by San Francisco-based mortgage tech provider Truework shows a whopping two-thirds of recent younger homebuyers are gambling their financial futures away on hopes for a major mortgage-rate drop in the next three years. They're taking on adjusted-rate mortgages (ARMs) at a lower rate or plan to refinance in the future. ARMs typically start with a lower initial monthly payment, but the rate adjusts periodically based on a market index, plus a margin.
ARMs typically start with a lower initial monthly payment, but the rate adjusts periodically based on a market index, plus a margin. "These temporarily lower rates drove them to buy homes that they would otherwise struggle to afford on a fixed rate, leaving them financially stretched and emotionally stressed," Truework cofounder Victor Kabdebon told Fortune. "In an uncertain environment, they can become a financial ticking time bomb."
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