Ten percent of mortgage borrowers looked at a 7% fixed rate and decided the real problem was too much certainty. They wanted risk. They craved variability. They saw an adjustable-rate mortgage and thought, you know what this 30-year commitment needs? Surprise mechanics.
The average person can't budget for next Tuesday. Now they're betting they can predict interest rate movements over three decades. Bold strategy from people who probably financed a Nissan Altima at 19% last year.
These aren't sophisticated investors hedging duration risk. These are people who think ARM stands for A Really great Mortgage. They're saving maybe fifty bucks a month in year one so they can get absolutely obliterated in year four when their rate adjusts to whatever number makes their lender's CEO hardest.
The same borrowers who need their mortgage broker to explain what escrow means three separate times are now making complex interest rate bets. They're out here playing yield curve chicken with their primary residence. These f*cking heroes saw 2008 happen, nodded thoughtfully, and said "but that was different."
It was not different.
The adjustable-rate mortgage exists for exactly one reason: so lenders can offer you a teaser rate that makes you feel smart while they construct a financial time bomb in your living room. It's a clearance sale on future foreclosures. It's a layaway plan for bankruptcy.
But rates hit 7% and suddenly everyone's a rate timing genius. They'll refinance before it adjusts, they say. They'll sell before the payment resets, they promise. They have a plan. The plan is they saw a lower number and their brain released dopamine.
Turns out the same people who bought Pelotons at the top are now buying houses at the bottom of their financial intelligence.
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