Are adjustable rate mortgages making a comeback?
Yes, by at least one measure. Michael Bordenaro Clips, a housing commentator on YouTube, cites figures showing adjustable rate mortgages (ARMs) made up about 10.3% of mortgage applications in the last week of September. That is a noticeably larger slice than in most recent years, and it is happening while many borrowers who took ARMs in 2022 and 2023 are hitting their first rate adjustment.
The practical question for buyers is simple: when does a lower starting rate justify the risk of a payment that can change later? In short, an ARM can work if you are confident you will sell or refinance before the fixed period ends, and if you have read the rate caps closely. It tends to backfire when the borrower assumes the rate will fall, or that refinancing will always be available. Both can fail.
This article walks through the numbers in the video, explains how ARMs work, and lays out how to weigh one against a 30-year fixed loan.
What the video says about the ARM comeback
Bordenaro's argument is that lenders and media are again promoting ARMs because high payments are squeezing buyers. He puts the 30-year fixed rate at about 7.5% and notes that a 15-year fixed is a bit lower. Rates on ARMs, he says, are usually lowest of all because the borrower, not the lender, carries the risk of future increases.
Check the benchmark yourself before relying on any single figure. Freddie Mac publishes its Primary Mortgage Market Survey weekly, and rates quoted by individual lenders can differ from it depending on credit score, down payment and points.
Here are the key figures from the video:
| Item | Figure cited |
|---|---|
| ARM share of applications, last week of September | About 10.3% |
| ARM resets so far in 2026 | About 64,000 |
| More ARMs leaving intro periods by end of 2026 | About 84,000 |
| Combined resets for 2026 | Roughly 150,000 |
| Estimated resets in 2027 | About 186,000 |
| Range of rate-cap jumps mentioned | 2% to 8% |
Bordenaro attributes the point about larger loans producing bigger payment shocks to ICE Mortgage. The reset counts are as stated in the video; we could not independently confirm them, so treat them as estimates. He also says "hundreds of thousands" of borrowers face a first reset, which is a looser description than his own totals, so the scale is best read as tens of thousands to low hundreds of thousands per year.
Two borrowers, two very different outcomes
The video leans on two stories that show how the same product can turn out differently.
The Rockford couple: a rate drop that did not lower their costs
A couple moved from Virginia to Rockford, Illinois, in 2023 looking for cheaper housing. The 30-year fixed rate then was around 8%, according to the video, so they took a three-year ARM at 6.875%. At the first adjustment their rate fell to 6.375%, and their mortgage payment dropped by about $60 a month.
That sounds like a clear win, and the couple has been held up as proof that ARMs can pay off. Bordenaro's point is that the win was thin. Homeowner's insurance, property taxes and maintenance rose enough that their total monthly cost of owning the house still went up. A lower rate lowers only one line of the budget.
The Naperville owner: a cheap start, a worrying finish
The second example is a buyer in Naperville, Illinois, who bought a three-bedroom house in 2022 with a 10-year ARM at 3.875%. He told the reporter he saved about $500 a month at the time compared with the alternative. His payment is now $2,300 a month, and the rate is set to adjust in 2032.
His circumstances have changed. He is divorced, is now the sole owner, and a friend rents a room to help cover half the costs. He would like to pay down principal before the reset, but Bordenaro says that if rates stay high, the new payment could take about half of his paycheck.
Note that this is a decade-long fixed period, so the reset is still years away. A great deal can change in six years, including rates. The story is more a warning about not understanding the product than a prediction of what will happen to this particular borrower.
How an adjustable rate mortgage actually works
An ARM has a fixed rate for an introductory period, then adjusts at set intervals. The label "5/1" usually means five years fixed, then a rate that can change once a year. Many newer loans use formats such as 7/6 or 10/6, where the rate then adjusts every six months. Check the exact schedule on your loan estimate.
Three terms matter most:
- Index and margin. After the intro period, your new rate is generally a market benchmark (the index) plus a fixed amount set by your lender (the margin).
- Caps. Most ARMs limit how much the rate can rise at the first adjustment, at each later adjustment, and over the life of the loan. Bordenaro says caps can range from a 2% jump to as much as 8%. That variation is the whole story: a loan with a lower first-adjustment cap is a different risk from one with a higher cap.
- Payment recalculation. When the rate resets, the payment is re-amortized over the remaining term, so a higher rate means a larger payment even though you have paid down some principal.
For a sense of scale, use this rough illustration, which ignores principal paydown and taxes. On a $400,000 loan, each one percentage point change in the rate shifts the principal-and-interest payment by roughly $270 to $280 a month. So a three-point jump would add about $800 a month. That is general arithmetic, not a forecast for any loan.
Why the exit routes are narrower than they look
The usual defense of an ARM is "I can just refinance later." Bordenaro lists several reasons that may not hold:
- Refinancing costs money. Closing costs are real, and the old advice to "marry the house, date the rate" assumes a refinance is cheap.
- New loans are priced at current rates. If your worry is that rates are high at reset, a new loan will also carry high rates.
- Appraisals can come in low. If local values slip, the home may appraise for less than needed, forcing you to bring cash to close or blocking the refinance.
- Your profile can change. A divorce, job loss, new debt or a lower credit score can all make it harder to qualify, as the Naperville owner's situation shows.
- Selling may mean a discount. In a market with plenty of unsold homes, owners who need to sell may have to cut prices to get a deal done.
These points line up with broader affordability pressure we have covered in Why Is It So Hard to Buy a House? Rates, Prices and Payments, where payments, not just prices, shape what households can handle.
When an ARM can make sense, and when it does not
Bordenaro acknowledges that ARMs have a legitimate use. His example is a buyer with a 5/1 ARM who knows for certain they will sell within three or four years. They keep the lower payment during the fixed window and sell before the first reset.
A fair reading of the trade-off looks like this:
| Situation | ARM may fit | Fixed-rate may fit |
|---|---|---|
| Expected time in the home | Clearly shorter than the fixed period | Long or uncertain |
| Budget cushion | Can absorb a higher payment at the cap | Little room for payment increases |
| Income outlook | Stable and likely to grow | Single income, variable pay or job risk |
| Rate view | Willing to accept uncertainty | Wants a payment that never changes |
The key phrase is "know for sure." Plans change, as the Naperville owner found. If your only protection is a hope that you can refinance, you are taking more risk than the lower rate suggests.
What this means for you
If you are a buyer: Ask for the worst-case payment, not just the starting payment. Have the lender show the payment if your rate rises by the maximum allowed at the first adjustment and over the life of the loan. If you could not handle that figure, the ARM is probably too aggressive. Also compare it with the total cost of ownership, including insurance and taxes, which the Rockford example shows can offset rate savings. For context on the longer affordability picture, see When Will Home Prices Become Affordable? The Math Behind the Wait.
If you are a seller: Be aware that more owners with adjusting loans could list their homes over the next couple of years, which can add competition. Price realistically from the start. Bordenaro warns that sellers who ask for an unrealistic price in this market will likely have to accept a discount later.
If you already have an ARM: Find your reset date, index, margin and caps in your loan documents now, not the month before. Consider making extra principal payments, which the Naperville owner is considering. Talk with a lender or HUD-approved housing counselor early about refinancing options, and build a savings buffer. Rate direction is also tied to bond markets; our piece on Treasury Yields and Mortgage Rates: What Dalio's Debt Warning Means explains that link.
Where the creator's view needs balance
Bordenaro's tone is blunt, and some of his claims go beyond what the evidence in the video supports.
First, the two examples are individual stories, not data on how most ARM borrowers fare. The Rockford couple's rate actually fell at reset, which shows outcomes vary. Many borrowers on ARMs plan to refinance or sell and do so without trouble.
Second, he predicts that "a lot" of resetting borrowers will become forced sellers. Whether that happens depends on how many resets are large, what rates and home prices do, and how much equity owners hold. Many 2022 and 2023 buyers have built equity through principal paydown and, in many areas, price gains, which gives them more options than the video suggests. Foreclosure and distress data are worth tracking before assuming a wave; see Foreclosures Up 42%: Is Distress Big Enough to Cut Home Prices? for how we frame that question.
Third, he recommends lowball offers on sellers with ARMs and mentions a free link to his own real estate team. Treat that as a commercial recommendation. Agents cannot always see a seller's loan type, and a seller who does not need to sell will simply decline. A low offer is a negotiating tactic, not a guaranteed discount, and it should be based on comparable sales and the home's condition.
What to watch next
Three things will shape whether the ARM comeback becomes a problem or a footnote:
- Mortgage rates. If rates fall meaningfully, resets become gentler and refinancing becomes more practical. Track weekly figures from Freddie Mac.
- The ARM share of applications. The Mortgage Bankers Association publishes this weekly. A sustained rise would suggest buyers are stretching for payment relief.
- Local prices and appraisals. Refinancing and selling both depend on values. Markets where prices are softening carry more risk for borrowers who need an exit.
The bottom line: an adjustable rate mortgage is a tool with a specific use, not a trick for escaping high rates. If the numbers only work at the starting rate, they probably do not work.