Adjustable-Rate Mortgages Are Making a Comeback. But Here’s What You Should Know
Adjustable-rate mortgages (ARMs) are making something of a comeback. Last week, they made up nearly 10% of all mortgage applications, reaching a post-pandemic high, according to the Mortgage Bankers Association. But today’s ARMs aren’t the risky loans of the past.
10/9/20252 min read
A Safer Kind of Adjustable-Rate Mortgage (ARM)
These days, most ARMs lock in a lower introductory rate for five, seven, or even ten years. The “teaser rate” loans of the 2000s which reset quickly and were often given to almost anyone are largely gone.
“The kinds of mortgages that are being originated today are considerably safer than those that were originated during the housing boom,”
— Ben Keys, Real Estate Professor at the Wharton School.
As of last week, the average rate on a 5-year ARM was around 5.4%, roughly a full percentage point lower than the traditional 30-year fixed mortgage.
That difference can make a home more affordable especially in high-cost markets.
“Borrowers getting a larger loan are much more likely to go to that adjustable rate because on a dollar basis, it saves them more on their monthly payments,”
— Michael Fratantoni, Chief Economist, Mortgage Bankers Association.
What to Watch Out For
Many borrowers choose ARMs thinking they’ll sell or refinance before their rate adjusts. But that plan can be risky if rates keep climbing.
“If you're going after an adjustable-rate mortgage purely for affordability, that’s dangerous,”
— Kara Ng, Economist at Zillow.
Ng also points out that many borrowers don’t fully understand how ARMs work. Zillow research shows most people searching online for “adjustable-rate mortgage” are looking for current rates — not how the loans actually adjust over time.
That means many homebuyers might be rushing into ARMs without knowing the full picture.
Tulender Insight 💡
At TuLender.com we believe understanding the why behind mortgage trends helps you make smarter financial choices. Adjustable-rate mortgages can be a great tool. If you know how long you plan to stay in your home, and if you’re ready for potential rate changes in the future.
If you’re considering an ARM, make sure you:
Know when and how your rate adjusts.
Understand your maximum possible payment.
Have a clear refinancing or selling timeline.
And remember affordability today shouldn’t come at the cost of stability tomorrow.
Thinking about whether an adjustable-rate mortgage is right for you?
Let’s talk. Tulender can help you compare options, plan for rate changes, and make a confident decision.