Adjustable rate mortgages now account for 18% of all new originations, the highest share since 2008, as buyers bet that continued Federal Reserve easing will lower their payments after the initial fixed period expires. The 5/1 ARM rate currently sits at 4.8%, roughly 70 basis points below the 30-year fixed alternative.
Mortgage brokers report that financially sophisticated buyers are choosing ARMs strategically, planning to refinance into fixed-rate products if rates decline as projected. The approach carries risk if economic conditions shift and rates rise instead.
Lenders have tightened qualifying standards for ARM products, requiring borrowers to demonstrate ability to pay at the fully indexed rate rather than the introductory rate.
