Homeowners Turning to Adjustable-Rate Mortgages
Higher mortgage rates are pushing some buyers toward ARMs for lower upfront costs, but future rate changes could raise payments if rates don’t fall.
NEW YORK — Some home buyers are increasingly considering adjustable-rate mortgages (ARMs) as a way to reduce borrowing costs amid the elevated mortgage interest rate environment.
Over a set period of years, ARMs can offer lower initial interest rates before they begin adjusting with market conditions, which makes them attractive for some buyers looking for short-term savings.
Some borrowers take out ARMs believing that they will be able to find a lower fixed-rate mortgage within five to 10 years and before the adjustable period begins. Some home buyers are taking advantage of the lower ARM rates while waiting for longer-term interest rates to dip.
Freddie Mac reported that the average 30-year fixed-rate mortgage increased to 6.11% for the week ending March 13. Some home buyers are opting instead for a seven-year ARM with a 5.5% rate to lock in immediate savings.
ARMs were once riskier and used by subprime borrowers, but with regulatory changes and longer initial fixed periods that provide a larger buffer before monthly payments jump, more wealthy home buyers are using ARMs.
Experts caution that there is no guarantee that long-term rates will fall. Cotality's Archana Pradhan said, "For many borrowers, ARMs are less a preference and more a necessary tool to access the market or afford a specific home."
Source: Wall Street Journal (03/12/26) Dagher, Veronica
© Copyright 2026 Smithbucklin