There’s a ticking clock right now for 5/1 ARM. If rates stay elevated then many are going to be out of a home.
Publicly reported data:
https://www.cnbc.com/2022/04/27/adjustable-rate-mortgage-dem...
If rates were to go up to 8%+, a lot of homeowners here would be unable to meet their repayments. The basis of the stress testing we've been doing since 2014 was only whether people could afford their mortgage if rates rose by 3%.
One of the Fed’s primary methods to control inflation is adjusting economic demand by making loans cheaper or more expensive.
In our current regime of fixed mortgages, new home buyers disproportionately bear the cost of the Fed’s effort to reduce inflation, since only they need to pay the higher costs. But if everyone had ARMs, the cost of reducing inflation would be spread out over everyone with a mortgage, so the pool of people affected would be significantly wider and the needed interest rate increases to fix inflation would be significantly lower.
Right now fiscal is doing the exact opposite, i.e. giving people stimulus while FED raises rates.