The share of mortgage applications for adjustable-rate products has fallen to just eight percent, down from a peak of 18 percent when fixed rates were above seven percent. As the gap between fixed and adjustable rates narrows, more borrowers are opting for the certainty of a fixed payment.
Loan officers note that ARMs still make sense for borrowers who plan to sell or refinance within five to seven years, particularly when the initial rate offers meaningful savings. However, the risk of payment shock at adjustment remains a concern for longer-term holders.
The trend underscores how sensitive borrower behavior is to even modest shifts in the rate environment.
