to qualify for a larger loan. These products were sold to borrowers who thought their homes
would appreciate (based on rising house prices over a number of years), enabling them to sell
their home for a profit after a few years or refinance. As a home appreciates, even borrowers
who are not paying the principal loan amount build up more equity. This would have made it
easier for subprime borrowers to refinance into another loan with a low interest rate. ARMs
put more homebuyers in the market, helping to raise home ownership rates to record levels in
2004, pushing up demand and house prices.