What are adjustable rate mortgages and why are they making a come back in 2026?

An Arm - or adjustable rate mortgage - is a mortgage with a fixed rate for the first 5, 7 or 10 years that then adjusts every 6 months or 12 months to then current market rates. The initial fixed rate for the 5, 7, or 10 years is a rate lower than a typical 30 year rate mortgage such as a 5.5% arm vs a 6% standard 30 year mortgage. The rates of the ARMS have been falling more than the 30 year mortgage rate.  

ARMS are making a come back due to Strategic Hedging.  Strategic Hedging is when Borrowers expect interest rates to decrease over the next few years, allowing them to benefit from lower rates now with an ARM while planning to refinance later when interest rates drop.

Owners believe that they will either not be in the home longer than the fixed-rate period of the ARM or that they can refinance into another 30-year mortgage at a rate lower than the adjusted rate when the adjustment occurs.  

ARMs are particularly attractive to those knowing they will not be in a home long term such as knowing job assignment is only temporary for a few years in a particular area of the country.  For many, an ARM is the choice as they are climbing the success ladder and knows a job move will be coming to further their career.  It allows quite a big savings on a monthly basis depending on the size of your mortgage, especially when considering the savings over the 5, 7 or 10 year period.

While ARMs are popular, they carry the risk of higher payments if the interest rates increase higher than what you could have locked in with a 30 year long term rate when deciding to do an ARM.

If you are wondering whether an ARM is a good idea for you, contact my lending partner at Motto Mortgage Simplified, Greg Leaptrotte.  Greg will walk you through the Pros and Cons to help you determine what is the best option for your situation.

And in the meantime, if you are thinking of selling or buying, give us a call.  Remember my team and I are on standby, 7 days a week, ready to help you take the smoother road to sold.