Rising mortgage rates push more buyers toward adjustable-rate loans

Fixed-rate mortgage costs have surged to 7.28%, the highest since late 2023, according to Freddie Mac, leading many homebuyers to explore adjustable-rate mortgages (ARMs). ARMs typically offer a lower introductory rate for five to ten years before resetting annually, which can keep early payments down but may increase later. The Mortgage Bankers Association reports that ARM applications now represent 10.3% of all mortgage requests, the highest share in a year.

Analysts explain that the gap between ARM and fixed rates creates a strong incentive for borrowers, especially for larger loans where savings can be substantial. However, lenders caution that borrowers need a clear plan for refinancing or selling before rates adjust, as future payments could rise sharply.