Nearly 10% of Borrowers Are Choosing ARMs. Should You?

Mortgage rates jumped again in mid-September 2026, and borrowers responded by looking for savings wherever they could find them. According to the Mortgage Bankers Association's weekly survey, as reported by CNBC, adjustable-rate mortgages (ARMs) made up 9.8% of all applications. That's up from 8.4% the week before. It is also more than three times the roughly 3% share ARMs had during the record-low-rate years of the pandemic.

What Happened to Rates

MBA reported that the average 30-year fixed rate on conforming loans ($832,750 or less) rose to 7.12% from 6.97%, the highest level since 2024. Rates on 5-year ARMs were more than a full percentage point lower than fixed rates. That gap is what pushed more borrowers toward ARMs.

Higher rates also slowed overall demand. Refinance applications fell about 3% for the week and were roughly 62% lower than a year earlier. Purchase applications slipped about 1% for the week and were about 11% lower year over year, just as the fall buying season gets going.

How an Adjustable-Rate Mortgage Works

An ARM starts with a fixed rate for a set period, commonly 5, 7, or 10 years. After that, the rate adjusts on a schedule based on a market index (today usually SOFR) plus a fixed margin. Most ARMs today adjust every six months after the fixed period, which is why you'll see names like 5/6, 7/6, or 10/6.

ARMs come with caps that limit how much the rate can change at the first adjustment, at each adjustment after that, and over the life of the loan. Those caps are the most important numbers in the loan. They tell you your worst-case payment before you ever sign.

When an ARM Can Make Sense

• You expect to move or sell within the fixed period. If you'll likely be in the home 5 to 7 years, a 7- or 10-year ARM can save real money without ever reaching an adjustment.
• You're buying a larger loan amount. On a bigger balance, a one-point rate difference means a meaningful monthly savings.
• You have a clear plan to refinance or pay down the balance. Rising income, an expected bonus, or plans to pay the balance down can make the lower starting payment worthwhile. (See when a refinance makes sense.)
• You can comfortably afford the capped payment. If the worst-case payment would still fit your budget, the risk is one you can manage.

When a Fixed Rate Is Still the Better Choice

If this is your long-term home, if your budget has little room to spare, or if a higher payment later would cause real stress, a 30-year fixed rate buys certainty. That certainty is worth paying for. Also remember that a future refinance depends on rates actually falling and on you still qualifying at that time. Neither is guaranteed.

There are also middle-ground options to compare with an ARM. These include a temporary or permanent rate buydown (often paid for by seller concessions), a 15- or 20-year fixed loan, or an FHA or VA loan, which sometimes prices better than a conventional loan. Our mortgage calculators can help you compare payments.

Questions to Ask Before Choosing an ARM

• How long is the fixed period, and how often does the rate adjust afterward?
• What index and margin does the loan use?
• What are the initial, periodic, and lifetime caps, and what is my maximum possible payment?
• Is there a prepayment penalty? (There shouldn't be on most residential loans.)
• How much am I actually saving each month compared with a fixed rate, and what would I do with that savings?

The Bottom Line

The rise in ARM applications shows how hard buyers and homeowners are working to manage payments at 7% rates. An ARM can be a smart choice for the right borrower with the right timeline. It can also be the wrong choice for someone stretching to afford a payment today. The right answer comes from your numbers and your plans, not the headlines.

Source: Mortgage Bankers Association weekly applications survey for the week ending September 18, 2026, as reported by CNBC on September 23, 2026. Rates change daily. Figures shown are market averages, not a quote or offer.