Adjustable-rate mortgages (ARMs) have made a comeback as homebuyers and refinancers seek relief from stubbornly high interest rates. Since 2017, their concentration of all mortgage loans has nearly doubled and now stands at 30% (see chart). It’s hardly surprising: ARMs offer significantly lower rates than traditional 30-year fixed loans, allowing borrowers reduced monthly payments and improved affordability—an appealing advantage in today’s tight housing market.
This rate flexibility, combined with shorter time horizons for many homeowners, makes ARMs especially attractive for first-time buyers, those looking to upgrade at some point and those anticipating career or lifestyle changes. With uncertainty continuing to be the norm, ARMs offer a smart short-term hedge. They allow borrowers to enter the market now without committing to today’s elevated long-term rates.
The lesson for lenders? Look to refresh your ARM offerings to help rebuild borrower confidence. Untapped demand in today’s tepid mortgage market could very well follow.
Mortgage ARM % Concentration vs. Funded Rate
Source: LendersBenchmark FM Originations
