"A risky mortgage instrument that helped spark the Great Financial Crisis is on the rise, but three things are different this time around. Adjustable-rate mortgages (ARMs), once the villain of the subprime meltdown, are surging in popularity as homebuyers look for savings in a high-rate era. The share of ARMs reached nearly 13% of all mortgage applications this fall, per the Mortgage Bankers Association, the highest level since 2008."
"For buyers today, the lure is clear: ARMs offer starting rates about a full percentage point lower than fixed-rate loans, making the difference between buying a home or staying sidelined. The typical 5/1 ARM has an interest rate in the mid-5% range, compared to the 30-year fixed rate's 6.3% and above. On a $400,000 loan, that initial discount translates into $200 or more in monthly savings, enough to tip the scales for first-time buyers or those seeking a larger property."
Adjustable-rate mortgages have surged to nearly 13% of mortgage applications, the highest share since 2008. ARMs offer starting rates about a full percentage point lower than fixed-rate loans, producing substantial monthly savings—for example, a typical 5/1 ARM in the mid-5% range versus a 30-year fixed at about 6.3%, yielding roughly $200 or more monthly on a $400,000 loan. The product exposes borrowers to reset risk after the initial fixed period, so buyers are effectively betting the Federal Reserve will cut rates before adjustments occur. ARMs played a major role in the mid-2000s collapse, but current lending and oversight standards have changed.
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