Posted 21 December 2004 - 04:05 PM
Everything I have read so far just talks about how stable it is, but not what effects the rise and fall. AND, I keep reading that the 12-MTA hasn't changed more than .25% in a single month for the last ten years...but even IF that remained the same, there is a possibility of it rising by 3% total in a year, that is scary...
I am hoping to understand what effects it and TRY to perdict/gauge the future
Posted 21 December 2004 - 05:29 PM
Not my area, but from what I've read, this is based on the trailing average of 1-yr Treasuries. To answer your question directly, the index rate will rise as the yields on 1-yr Treasuries rise. The rise will take place slowly, since you are using the last 12 months of data to base your rate. As such, the rate will also fall slowly (much slower than a traditional ARM). That's the curse and blessing of the trailing average.
Hope this helps. Please feel free to clarify if I missed your question!
Posted 28 December 2004 - 12:21 AM
So I guess from what I am seeing, this loan could rise as much as 3% (worst case) in one year (judging by historical changes of .25% a month)???
But what can a regular person watch for to indicate future rise, say a year of two out?
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