Are ARMs Coming Back? Why Some Buyers Choose an Adjustable-Rate Mortgage
Are ARMs Coming Back? Why Some Buyers Are Choosing Them
Sharing this from the Mortgage Bankers Association's weekly survey (11/4/2026), with background from Homes.com News (Moira Ritter, 10/14/2026).
Where this came from: - Mortgage Bankers Association, weekly survey release, 11/4/2026: https://www.mba.org/news-and-research/newsroom/news/2026/11/04/mortgage-applications-decrease-in-latest-mba-weekly-survey - Homes.com News, Moira Ritter, "ARM demand hits highest level in a year as mortgage rates climb," 10/14/2026: https://www.homes.com/news/arm-demand-hits-highest-level-in-a-year-as-mortgage-rates-climb/2066538922/
What the numbers say
The Mortgage Bankers Association put out its weekly survey on 11/4/2026, covering the week ending 10/30/2026. A few things stood out to me.
Adjustable-rate mortgages, or ARMs, made up 11.4% of all applications. That's the highest share since September 2025. A few weeks earlier, Homes.com reported the share at 10.5%, so it keeps climbing.
Overall, applications fell 1.2% from the week before. Purchase applications fell 2%, and refinance applications were basically flat, up 0.1%. Compared with the same week a year ago, purchase activity was 19% lower and refinance activity was 60% lower.
The average 30-year fixed rate dipped to 7.30% from 7.37%. The MBA's chief economist, Mike Fratantoni, said rates "drifted down to their lowest level since September 2026." The average 5/1 ARM rate was 6.29%.
Fratantoni put it this way: "As we have highlighted in recent weeks, more borrowers are choosing ARMs in this environment to lower their initial payments, with the ARM share at its highest level since September 2025."
Why would someone want an ARM?
An ARM gives you a set rate for a starting period, often 5 or 7 years. After that, the rate can change, usually once a year, based on a market index your lender names in the loan.
Here's why some buyers like that:
- A lower starting rate. The starting rate on an ARM is often lower than a 30-year fixed rate. In the MBA's latest survey, the 5/1 ARM averaged about one point below the 30-year fixed.
- A plan to move or refinance. If you expect to sell or refinance before the fixed period ends, you may never see an adjustment.
- A known fixed period. With a 5-year or 7-year ARM, you know your rate for those first years, which makes budgeting easier.
Brad Case, chief residential economist for Homes.com, said it well in that earlier article: "The cost of an ARM depends not only on what happens to interest rates, but how long you plan to keep that loan." He added that the choice is "about planning for uncertainty and figuring out whether the loan's timeline lines up with your timeline."
The risks to weigh
An ARM isn't free money. Here's what to look at closely.
- Rate resets. When the fixed period ends, your rate can go up or down. Nobody knows where rates will be in 5 or 7 years.
- Caps. Most ARMs have limits on how much the rate can change. An initial cap limits the first adjustment. A periodic cap limits each later adjustment. A lifetime cap sets the highest rate the loan can ever reach. Caps vary by loan, so ask your lender for yours in writing.
- Payment shock. If the rate jumps at the reset, your monthly payment can jump too. Make sure you could handle the payment at the lifetime cap.
- Refinancing isn't guaranteed. Plans change. Rates may be higher when you want to refinance, your home's value could drop, or your income or credit could change.
For example only: Say a loan starts at 6% for 5 years and has a 2% initial cap. At the first reset, the rate could go as high as 8%. These are round numbers to show how a cap works, not a quote or a real rate.
Talk to your lender
An ARM can make sense for some buyers and not for others. It depends on how long you plan to stay, how much payment change you could handle, and your whole money picture. Talk to your lender, ask for a Loan Estimate on both an ARM and a fixed-rate loan, and compare them side by side.
If you're thinking about buying, give me a call. I'm happy to help you think through your timeline and connect you with lenders who can walk you through the details.
Source: Mortgage Bankers Association, Weekly Mortgage Applications Survey released 11/4/2026: https://www.mba.org/news-and-research/newsroom/news/2026/11/04/mortgage-applications-decrease-in-latest-mba-weekly-survey. Background and Brad Case quote from Homes.com News (Moira Ritter), 10/14/2026: https://www.homes.com/news/arm-demand-hits-highest-level-in-a-year-as-mortgage-rates-climb/2066538922/
Camille Duke, Jeep Girl Realty, Inc. BK3323552, 850-692-9449, serving Tallahassee, Crawfordville & North Florida
