Rising interest in adjustable-rate mortgages amid high fixed rates
With mortgage rates above 7%, more homebuyers are turning to adjustable-rate mortgages (ARMs) for lower initial rates. ARMs currently offer about a 1 percentage point discount compared to traditional 30-year fixed loans, and their share of applications has increased from 5.9% in the week ending October 4, 2024, to 10.3% by October 2, according to the Mortgage Bankers Association. While ARMs can provide immediate savings, they carry risks as rates may reset higher after an initial fixed period of five to ten years. Experts like Hannah Jones from Realtor.com caution that buyers should treat ARM decisions strategically rather than out of necessity. The potential for future rate declines and refinancing opportunities is a key consideration. Melissa Cohn of William Raveis Mortgage notes the uncertainty in predicting interest rates, but suggests there's still optimism about lower rates returning within one to two years if inflation cools or other economic factors shift.
Topics: adjustable-rate mortgages (ARMs) homebuying trends mortgages