It had been one of the biggest drivers of housing prices, the unbelievable attractiveness of adjustable rate loans. But all those Fed rate increases have really taken the muscle out of ARMs, as a recent trip to mortgage lender Countrywide's Web site shows. Countrywide has a great feature on its site that allows you to quickly price loans. Back in the go-go era of a couple of years ago, the site wouldn't automatically give you a quote on a 30-year, fixed rate loan. You had to perform a custom search. Now the 30-year, fixed rate pops up automatically and its not hard to see why. A $500,000 30-year, fixed rate, no points loan will cost you $3,369 a month, in my neck of the woods. An adjustable rate loan with a five-year fixed rate period, meanwhile, will cost $3,285 a month. That's not much of a difference considering that you are exposing yourself to 25 years of possible rate increases after the fixed rate period ends. An interest only, adjustable rate loan will save you a bit more at $2,917 per month but that's nothing like the $1,000 a month or more in savings such loans offered a few years ago when short term rates were much lower. Mortgage rates are still cheap by historical standards, but those low, low, low short term rates are history themselves.
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