Adjustable rate mortgages now account for nearly 15 percent of all mortgage applications, up from just 5 percent two years ago. Borrowers are attracted by initial rates that are often a full percentage point lower than comparable fixed-rate products.
Financial advisors caution that ARMs carry risk if rates rise during the adjustment period, though current market expectations point toward continued rate declines. The 5/1 ARM remains the most popular configuration among applicants.
Lenders have expanded their ARM product lines to include hybrid options with longer fixed-rate periods, offering borrowers more flexibility in managing interest rate exposure.
