The article tries to get us to sympathize with an elderly couple whose ARM has gone from 7% to 10.5% in the last two years:
[Lorraine, age 72, said,] "At the time of the loan, they tell you, 'Well, it may go up, but it's probably going to go down.' You want it to be so, so you believe it."Holy cow, did you sleep through the late 1970s??? It's one thing when 20-somethings fall for the smooth talk of mortgage lenders, but people who have lived more than a few decades have no excuse. Probably go down? Did you think the Fed was going to make interest rates go negative? There wasn't much room between the rate and zero when you got your ARM two years ago.
The housing market is going to collapse soon, and ARMs are the reason it will happen. And that makes me mad because it denies me the growth in real estate value that previous generations of Americans reaped. I wisely got a 30-year fixed mortgage at the ridiculously low rate of 5.25% a few years ago (refinanced from 7.25%, which was still a good rate). But now as interest rates rise, the idiots who got ARMs for 3% because that's all they could afford will be forced to sell or foreclose. It will be the worst disaster for the existing home market since the "white flight" of the 1950s and 1960s.
What good are ARMs in a low interest rate environment? Why let someone buy a house when he/she can't afford it over the long term? It makes the mortgage lenders happy. It makes the real estate brokers happy. It makes the sellers happy. The rest of us get screwed by their folly.
Anybody who needs an ARM to buy a home should not buy a home. Keep living in a crappy apartment for a few years until you can afford to get a fixed rate instead of playing Russian roulette with your financial future.