ARMs a-okay for some

NEW YORK – Nov. 9, 2006 – Adjustable rate mortgages (ARMs) are getting a lot of bad press these days, but Merrill Lynch economist Sheryl King says they can still be a very smart choice.

King says Merrill economists predict that the economy will soon weaken and the Federal Reserve will start cutting interest rates early next year. By the end of 2007, ARMs will be significantly cheaper.

She believes that the Fed will reduce the federal funds rate, now at 5.25 percent, by 1.25 percentage points by the end of 2007. If she were buying a home, she would choose an adjustable rate and ride it down, she says.

Source: The San Francisco Chronicle, Kathleen Pender (11/7/2006)

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