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LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

ARMageddon? Number of Adjustable-Rate Mortgages Offered to Borrowers Has More Than Tripled Since 2021

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Content was accurate at the time of publication.

Through the early 2000s prior to the 2007-2009 financial crisis — also known as the Great Recession — adjustable-rate mortgages (ARMs) were quite common. In 2005, for example, they accounted for as much as 42% of all new mortgage originations. Following the Great Recession, however, ARM originations plummeted and the number of new ARMs issued remained around 10% or below from 2009 through 2021.

But that doesn’t mean ARMs have gone extinct. In fact, owing in part to rising mortgage rates, ARMs appear to be making a dramatic comeback. To see how dramatic this comeback is, LendingTree compared the number of conventional 30-year 3/1, 5/1 and 7/1 ARMs offered to users of our online mortgage shopping platform in the first half of 2021 to the number offered in the first half of 2022.

While ARMs are still less common than their fixed-rate counterparts, the number of borrowers offered them increased by a substantial 230% from the first half of 2021 to the first half of 2022.

Key findings

  • The number of adjustable-rate mortgages offered to LendingTree users increased by 230% from the first half of 2021 to the first half of 2022. Put another way, borrowers are being offered ARMs 3.3 times as often as they were a year ago. Though the number of ARM offers has increased significantly, the number of fixed-rate mortgage offers has decreased by 9.2%.
  • While ARMs are being offered more frequently than a year ago, about 11 30-year, fixed-rate mortgages are offered for every 30-year, adjustable-rate mortgage. This means that borrowers are still much more likely to get offered a fixed-rate mortgage than an ARM. That said, about 41 fixed-rate mortgages were offered for every adjustable-rate mortgage in the first half of 2021, so the popularity gap is shrinking.
  • In the first half of 2022, the average introductory APR on the types of ARMs examined in our study was 89 basis points lower than the average APR offered on a conventional 30-year, fixed-rate mortgage. Specifically, the average introductory APR offered on 30-year 3/1, 5/1 and 7/1 ARMs was 3.97% in the first half of 2022. The average APR offered on conventional 30-year, fixed mortgages over the same period was 4.86%.
  • Because of the 89 basis-point gap in average APRs, ARM borrowers would spend about $157 less monthly on a $300,000 loan than fixed-rate mortgage borrowers. Though adjustable-rate borrowers would save money in the short term, their payments could rise significantly once their rate begins to adjust. Savings aren’t guaranteed through the loan’s lifetime.
  • As ARMs have grown more popular, the share being offered to borrowers with riskier credit scores has increased. For example, between the first half of 2021 and the first half of 2022, the share of ARMs offered to borrowers with a credit score of 680 or higher (good to exceptional) decreased by 21.32 percentage points. Over that same period, the share of ARMs offered to borrowers with credit scores of 620 to 679 (fair to good) increased by 19.98 percentage points, while the share offered to those with scores of 619 or below (poor to fair) increased by 1.34 percentage points.

What are the risks of an ARM?

Ultimately, the nature of an adjustable rate on a loan as large as a mortgage makes ARMs inherently riskier than their fixed-rate counterparts. And ARMs might not always remain cheaper. If rates were to rise dramatically — like they have this year — an ARM borrower’s rate and, in turn, their monthly mortgage payment could increase significantly. (And this is despite notably lower introductory rates than their fixed-rate counterparts) This higher payment might increase a borrower’s risk of default.

Now, safeguards are built into today’s ARMs to help prevent them from becoming unmanageable. These safeguards, like initial and lifetime adjustment caps, typically make it impossible for the rate on an ARM to increase by more than two percentage points the first time it’s adjusted and/or by more than five percentage points over its lifetime.

Unfortunately, these safeguards may provide too little help to those unprepared for their payments to rise. Keep in mind that a rate increase of even two percentage points can increase a person’s monthly mortgage payment by hundreds of dollars — depending on factors like their loan amount and starting rate.

Even if it’s possible for rates to remain constant or even fall throughout an ARM’s lifetime, the risk of an increasing rate should make any borrower thinking about getting an ARM carefully consider whether they can handle a higher monthly payment before they move forward.

Could increased ARM usage lead to another housing market collapse?

To better understand the risk of ARMs — not only to individual borrowers, but to the housing market and economy as a whole — consider the Great Recession of 2007 to 2009. This recession, generally considered the worst since the Great Depression of 1929 to 1941, was largely triggered due to large-scale mortgage defaulting among American homebuyers. Many borrowers who defaulted did so because the rate on their adjustable-rate mortgages had risen so high that they could no longer afford to make their monthly payments.

The chain reaction caused by so many defaults led to some of the largest bank collapses and the highest unemployment in more than 20 years. It threw virtually the entire global economy into disarray.

Will increased ARM usage lead to another downturn as major as the Great Recession? There isn’t much evidence to suggest that ARMs will be a major cause of a financial collapse in the near future. Though ARMs are becoming more popular, they still aren’t nearly as common as they were prior to the Great Recession. Moreover, mortgage lending standards are tighter across the board, meaning that borrowers at a high risk for default are less likely to get an ARM than in the early to mid-2000s.

With that said, the LendingTree data indicates that more adjustable-rate mortgages are going to borrowers with fair and even poor credit. If left unchecked, this trend could result in problems in the future.

While increased ARM usage may not lead to an immediate economic disaster, there’s a chance that relaxed lending standards could mean that adjustable-rate mortgages may end up once again playing a part in a potential downturn.

Tips for borrowers considering an ARM

Though adjustable-rate mortgages tend to offer attractive benefits and can be good options for some buyers, their risks shouldn’t be overlooked. Here are three tips for borrowers to consider before they decide to get an ARM.

  • Be sure you can afford it. Just because you can afford an ARM in the short term doesn’t mean that’ll always be the case. Don’t assume your rate won’t increase over time or that you’ll make significantly more money when your loan adjusts to a higher rate. If you find you would just barely be able to keep up with the monthly payment on an ARM with its introductory rate — and that you couldn’t keep up with it if your rate increased — you may want to consider a different type of loan or put your homebuying plans temporarily on hold.
  • Know your loan’s specific terms. It’s important you have a good understanding of your loan’s terms before you take out an ARM. For example, you’ll want to be sure you know the differences between a 3/1 and 5/1 ARM, as well as how much your rate can be increased during an adjustment period. Otherwise, you might be blindsided by a changing rate and a higher monthly payment.
  • Don’t feel like an ARM is your only lower-rate option. While ARMs tend to come with lower introductory rates than their fixed-rate counterparts, that doesn’t mean an ARM is the only way for a borrower to access a lower rate than they would with a conventional, fixed-rate loan. For example, government-backed loans from the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) often come with lower fixed rates than similar conventional loans. Not only that, these loans are often easier to qualify for than other types of mortgages.


This study’s data comes from about 1.9 million users of the LendingTree online mortgage shopping platform offered either a conventional 30-year fixed-rate or a conventional 30-year 3/1, 5/1 and 7/1 adjustable-rate mortgage between Jan. 1 and June 30, 2021, and Jan. 1 and June 30, 2022.

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