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With stubbornly high interest rates, some are reconsidering adjustable-rate mortgages
Some Americans are reconsidering adjustable-rate mortgages as interest rates stay high, with ARMs now making up only about 5% of U.S. loans.
Key points
- The 30-year fixed-rate mortgage is the most popular home loan in the U.S., with fixed rates at 7% or more.
- ARMs account for only about 5% of U.S. mortgages and carry stigma from the housing crisis.
- Redfin data back to 1971 showed borrowers with ARMs had at least one chance to refinance lower about 70% of the time.
Why it matters. Borrowers weighing high fixed mortgage rates may find ARMs more cost-effective historically, though the reporters caution that the low-rate period could have been a historical anomaly.
NPR's Planet Money reporters Wailin Wong and Adrian Ma examined adjustable-rate mortgages (ARMs) as some Americans reconsider them amid high interest rates. Wong said 30-year fixed-rate mortgages are at 7% or more, while ARMs make up only about 5% of U.S. mortgages. Redfin analysis of data back to 1971 found that about 70% of the time, ARM borrowers had at least one chance to refinance into a lower rate, according to Redfin's Chen Zhao.
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With stubbornly high interest rates, some are reconsidering adjustable-rate mortgages
With the rates for 30-year fixed-rate mortgages at 7% or more, is it time to reconsider the far less popular adjustable-rate mortgage? New analysis shows that ARMs have paid off for borrowers. With the rates for 30-year fixed-rate mortgages at 7% or more, is it time to reconsider the far less popular adjustable-rate mortgage? New analysis shows that ARMs have paid off for borrowers. Transcript MARY LOUISE KELLY, HOST: For any American who lived through the housing crash, there's a certain type of mortgage that will send a shiver down the spine. It's called an adjustable-rate mortgage. But with interest rates as stubbornly high as they are right now, some people are reconsidering them. Our colleagues at The Indicator from Planet Money, Wailin Wong and Adrian Ma, tell us why. WAILIN WONG, BYLINE: If you have a mortgage, chances are you have a fixed rate - one rate that stays the same for the life of the loan. The 30-year fixed rate mortgage reigns supreme in the U.S. We're actually the only country where this is the most popular kind of home loan. ADRIAN MA, BYLINE: The fixed rate mortgage isn't the only choice though. You could also get an adjustable-rate mortgage, or ARM. These are way less popular, only about 5% of mortgages in the U.S. WONG: ARMs embody a lot of terrifying memories for people who lived through the housing crisis. This type of loan accounted for about a third .