ARMs Are Back: How to Talk About Adjustable Rates Now That Fixed Rates Crossed 7%

Have you noticed it yet?

A buyer sits down, looks at a payment quote at 7%, goes quiet for a second, and then asks the question. “What about one of those adjustable-rate loans?”

If you haven’t heard it yet, you will. And soon.

According to a new report from Inman, built on Intercontinental Exchange’s October Mortgage Monitor, adjustable-rate mortgages are making a real comeback. The 30-year fixed rate crossed 7% for the first time in 20 months, with ICE’s index hitting 7.31% on September 30. And borrowers are responding.

The Numbers Tell the Story

Here’s what the data shows:

• ARMs made up nearly 11% of mortgage rate locks the week of September 18.
• The ARM share of refinances hit 17.5%, the highest since 2019.
• There are now 3.1 million active ARMs, the most in five and a half years. That’s about 5.6% of all mortgages.
• The payment on a median-priced home with 20% down climbed to about $2,383 at a 7.2% rate, eating up 31.7% of median household income. Back in January, it was 27.6%.

Meanwhile, purchase applications fell 8% over three weeks, and more than half of buyers in August paid at least half a point upfront to lower their rate.

Put that together and you get a simple picture. Buyers are hunting for relief. Some will find it in a buydown. Some will find it in an ARM.

The Other Side of the Coin

Now here’s the part I want every agent and loan officer to slow down and read twice.

Back in 2020, about 74,000 people took out seven-year ARMs. Their median balance is $629,000. Their median rate is 2.75%. Pretty sweet, right?

In 2027, their fixed period ends. ICE estimates that rate jumps to 5.79% at the first reset. That’s a median payment increase of $1,066 a month. After later adjustments, it grows to $1,269 a month, a 43% increase.

Think about that for a second. Same house. Same family. Same paycheck. Suddenly, a car payment and a half shows up every month.

And it doesn’t stop there. About 186,000 ARMs reach the end of their fixed periods in 2027. Scheduled first resets climb to 252,000 in 2029 and 425,000 in 2032.

Andy Walden, head of mortgage and housing market research at ICE, summed it up well: “ARMs are becoming more attractive to borrowers looking for relief from today’s higher fixed rates, but the overall market exposure to adjustable payments remains relatively limited.”

Translation? This isn’t 2007. Today’s ARMs are fully underwritten, and roughly 90% of new ones carry a fixed rate for at least five years. About half are fixed for at least seven. But limited exposure for the market doesn’t mean limited exposure for your client.

An ARM Is a Tool, Not a Trap

I like to think of an ARM like a lease with a renewal clause. You get a great rate for a set term. But you’d better know what the renewal terms look like, and you’d better have a plan before you get there.

Here’s the deeper principle. The loan isn’t the risk. The lack of a plan is the risk.

An ARM can be a brilliant fit for the right borrower. A military family who knows they’ll PCS in three or four years. A buyer whose income is clearly on the way up. Someone planning to sell or pay down the balance before the first adjustment. For those folks, paying for 30 years of rate certainty they’ll never use can be money left on the table.

But for the buyer who’s stretching to qualify and hoping rates fall in time to refinance? Hope is not a strategy.

What This Means for Realtors and Loan Officers

1. Get ahead of the question. Buyers are going to ask about ARMs. Be the one who explains it clearly before they read a scary headline or a too-good-to-be-true ad.
2. Teach the three numbers. Every ARM conversation should cover the starting payment, the payment at first adjustment, and the worst-case payment under the caps. If a client can’t handle number three, it’s probably not their loan.
3. Match the loan to the life plan. Ask how long they’ll realistically stay. Around Fort Campbell, PCS timelines make this conversation especially relevant.
4. Compare it side by side. Put the ARM next to a fixed rate with a seller-paid buydown. Sometimes the buydown wins. Sometimes the ARM does. Clarity wins every time.
5. Mine your past clients. Some of your 2019 and 2020 buyers may be holding ARMs heading toward a reset. A friendly check-in now could save them a lot of stress later.

What This Means for Homebuyers

1. Know your caps. Ask how much the rate can rise at the first adjustment, each one after, and over the life of the loan.
2. Plan for the payment, not the rate. Make sure the highest possible payment still works for your budget.
3. Don’t bank on a refinance. Rates could fall. They also might not. Choose a loan you can live with either way.

Knowledge is power. The buyer who understands the fine print makes a decision. The buyer who doesn’t makes a guess.

The Bottom Line

ARMs are back because buyers need breathing room, and that’s okay. Our job isn’t to scare people away from them or push people into them. Our job is to make sure every client walks in with their eyes wide open.

Here’s my challenge for you this week. Before you show another home or write another pre-approval, practice explaining an ARM in under two minutes. Starting payment. Reset. Caps. Plan. If you can say it simply, your clients will trust you with the big decisions.

And if you have a buyer who wants to see an ARM and a fixed rate side by side, send them my way. They can get started right here: katedeiboldt.vandyk-pos.com. I’d love to help them find the right fit.

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Frequently Asked Questions

1. What is an adjustable-rate mortgage (ARM)?

An ARM is a home loan with a fixed interest rate for an initial period, often five, seven, or ten years. After that, the rate adjusts at set intervals based on a market index plus a margin, so the payment can go up or down.

2. Why are more buyers choosing ARMs right now?

With 30-year fixed rates crossing 7% for the first time in 20 months, an ARM’s lower initial rate can mean a lower starting payment. ICE reports ARMs made up nearly 11% of rate locks in mid-September.

3. What does a 7/6 or 5/6 ARM mean?

The first number is how many years the rate stays fixed. The second usually describes how often it adjusts after that. A 7/6 ARM, for example, is fixed for seven years and then adjusts every six months.

4. What are rate caps?

Caps limit how much your rate can rise. There’s typically a cap on the first adjustment, a cap on each adjustment after that, and a lifetime cap. Always ask your lender for all three.

5. How much could my payment increase at reset?

It depends on your balance, your caps, and where rates are at the time. ICE estimates 2020 seven-year ARM borrowers will see a median increase of $1,066 a month at their first reset in 2027, growing to $1,269 after later adjustments.

6. Are today’s ARMs like the ones from the 2008 crisis?

No. Today’s ARMs require full income and asset documentation, and borrowers are qualified with the payment adjustment in mind. About 90% of new ARMs are fixed for at least five years.

7. Who is a good candidate for an ARM?

Borrowers who expect to move, sell, or substantially pay down the loan before the first adjustment, or whose income is clearly rising. Military families with predictable PCS timelines are often a good example.

8. Who should probably avoid an ARM?

Buyers who plan to stay long term, are stretching to qualify, or couldn’t comfortably handle the highest possible payment under the caps. Peace of mind has value too.

9. Can I refinance before my ARM adjusts?

Often, yes, if you qualify at that time. But refinancing depends on future rates, your credit, income, and home value, so it shouldn’t be the only plan.

10. Is an ARM better than a rate buydown?

It depends on your timeline and goals. A seller-paid buydown on a fixed loan can lower your payment while keeping long-term certainty. Ask your lender to compare both options side by side.

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Source: This post was inspired by and adapts Homebuyers Turn to ARMs as Mortgage Rates Climb Past 7% by Jessi Healey, published by Inman on October 5, 2026. Data cited is from Intercontinental Exchange (ICE) and the Mortgage Bankers Association as reported in that article.

This article is for educational purposes only and is not a rate quote, loan offer, or commitment to lend. Figures cited are market data from third-party sources and are not specific to any VanDyk Mortgage product. Adjustable-rate mortgage rates and payments can increase after the initial fixed period. Rates and programs are subject to change without notice. All loans subject to credit approval, underwriting guidelines, and property eligibility. Not all applicants will qualify.

Kate Deiboldt, Senior Mortgage Advisor | VanDyk Mortgage Corporation | NMLS #18487 | Company NMLS #3035 | Kate@VanDykMortgage.com | (931) 980-9764 | Licensed in TN, KY, AL, FL, GA, TX, and IL | Equal Housing Lender. www.nmlsconsumeraccess.org