Adjustable-Rate Bombs

Financial Times (London), July 26

“The Consumer Federation of America [released] a report warning of a potential financial ‘time-bomb’ because of the strong interest of low-income consumers in adjustable-rate mortgages at a time of rising interest rates. … [A]s homes become increasingly difficult to afford and higher interest rates make fixed mortgages more expensive, more homebuyers are taking out more risky adjustable mortgages, for which the rate varies.” Keith Gumbinger, vice president at hsh Associates, an independent mortgage research firm, said, “Some of the products that are being originated today will turn into the foreclosures of tomorrow.”