Why Adjustable-Rate Mortgages Deserve a Closer Look
Adjustable-Rate Mortgages (ARMs) have been gaining real momentum, making up a growing share of total loan applications. As the Fed continues to ease and rates trend lower, that momentum will likely build.
Many borrowers shy away from ARMs because of their variable nature after the fixed period—but the math often tells a different story. Even in a conservative or “worst case” scenario, ARMs can outperform fixed-rate loans for years beyond the initial fixed term, thanks to the savings they provide upfront.
To help illustrate this, we’ve added a new ARM vs. Fixed comparison tool under the Calculators section of our website. It’s designed to make it easy to show clients the real numbers behind the decision—why an ARM can often make more financial sense.
In our recent video walkthrough, we ran a scenario using standard 5/2/5 caps on a 7/1 ARM. Even assuming rates rise 5% in year eight—a pretty aggressive move—the ARM still outperforms the fixed for roughly 8.5 years. Historically, over the past 40 years, ARMs have consistently proven to be the better value.
Looking Ahead
Next week, we’ll finally start to see some key economic data again. The Bureau of Labor Statistics had to bring in emergency staff to get the Consumer Price Index (CPI) report out on time, as it’s needed for the Social Security Cost of Living Adjustment (COLA) calculations before November. We’ll be watching closely to see what it says about inflation and how it might shape rate trends moving forward.