Adjustable-rate mortgages (ARMs) are making a comeback, representing 12.9% of all originations last week, the highest post-crisis level. ARMs offer lower rates than 30-year fixed mortgages for 5, 7, or 10 years before adjusting to market levels. With high conventional mortgage rates, ARMs are becoming more appealing to homebuyers. After falling out of favor post-crisis, ARMs are gaining popularity again in a market of high home prices and mortgage rates. Borrowers are showing interest in ARMs due to potential savings, but caution is advised due to the risks associated with fluctuating interest rates.

Today’s ARMs have stricter qualification standards, longer intro rate periods, and caps on rate increases. While ARMs can save borrowers money initially, there is a risk of higher interest rates down the line. Financial advisers recommend considering long-term affordability when choosing between ARMs and fixed-rate mortgages. ARMs can be beneficial for those planning to move or refinance before the adjustment period begins. The Federal Reserve’s rate cuts can also impact ARMs by lowering rates during adjustment periods.

While ARMs are seeing increased interest, some borrowers are still wary due to past financial crises. Borrowers are advised to assess their financial situation and future plans before opting for an ARM. Recent interest rate hikes have led to a rise in ARM business, attracting experienced buyers with sizable down payments seeking lower rates. It’s essential for borrowers to understand the risks and benefits of ARMs before making a decision.

Read more at Yahoo Finance: Adjustable-rate mortgages are staging a comeback as buyers seek lower rates