Adjustable-Rate Mortgages Look More Appealing Than Ever. Are They Worth It?

Surging mortgage rates have resurfaced an old question for homebuyers: How much risk is a cheaper monthly payment worth?In the final week of September, the average rate on a 30-year fixed mortgage climbed to 7.30%—its highest level since November 2023, according to the Mortgage Bankers Association. The average rate on a 5/1 adjustable-rate mortgage (ARM), meanwhile, was 6.47%.On a $400,000 home with 20% down, that would cut the initial principal-and-interest payment by about $178 a month—enough to make the difference between buying or staying on the sidelines, according to Hannah Jones, senior economist at Realtor.com®. “A buyer who can't afford a 30-year fixed-rate mortgage at 7% but can make payments on a 5/6 ARM at 6% may be priced out of fixed-rate borrowing entirely,” she says. “Increasingly, it may simply be the only way some buyers can enter the market at all.”And as the discount has widened, more borrowers have taken it. ARMs accounted for 10.3% of mortgage applications in late September, up from 7% at the beginning of the year and the highest share since October 2025.But the lower payment comes with a catch: Once the initial fixed period ends, the rate can rise—potentially...