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After what seemed like an unstoppable rise since the beginning of the year, long-term mortgage rates have since plummeted in an equally relentless manner.

Here in San Diego, though, the majority of buyers do not use 30-year fixed rate mortgages like those depicted by the blue line in the chart. The local housing market is influenced less by fixed rates than by adjustable mortgage rates, the the decline in which has been less dramatic.

But even the impact of adjustable rates is softened by the extensive use of negative amortization mortgages, which grant homebuyers a low initial “teaser rate” by allowing them to pay less interest than is owed and to add the unpaid remainder to the loan balance.

Nonetheless, the decline in mortgage rates is doubtless providing at least a little relief to a housing market on the ropes.

Perhaps even more relevant to potential negative amortization borrowers are the recently released federal guidelines on non-traditional mortgage lending. Check back soon for more detail on these new regulations.

– RICH TOSCANO

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