Approximately 150,000 borrowers holding adjustable-rate mortgages are scheduled to experience their first interest rate adjustment during the current year, according to data from ICE Mortgage Technology. An additional 186,000 borrowers anticipate their initial adjustment in 2027, and 155,000 more in 2028. Of this year’s cohort, roughly 64,000 have adjustments scheduled between August and December.
An ARM begins with a lower introductory rate compared to fixed-rate mortgages but transitions to a variable rate after an initial period, typically lasting five, seven, or ten years. Once the adjustable phase begins, rates generally reset annually or semi-annually. Because prevailing interest rates have increased since many of these borrowers initially obtained their loans, their monthly payments may rise substantially—potentially by hundreds of dollars or more than $1,000 in certain cases. However, a smaller segment of borrowers could experience rate and payment reductions.
Currently, 3.1 million ARMs remain outstanding, representing the highest volume in 5.5 years. Of these, 2.05 million borrowers are still within their fixed initial periods, while 1.05 million have transitioned into their adjustable phases. ARMs constitute approximately 5.6% of the roughly 55.4 million active mortgages nationally. Specific payment adjustments depend on initial rates and rate caps, which typically limit increases to 2 percentage points at first adjustment, 1 point for subsequent adjustments, and a maximum of 5 points over the loan’s lifetime.
Borrowers concerned about affordability have several options available. Those wishing to remain in their homes may refinance to fixed-rate mortgages, though this involves closing costs typically ranging from 2% to 5% of the loan amount. Alternatively, borrowers can explore loan modifications through consultations with housing counselors affiliated with the Department of Housing and Urban Development. Lenders are required to provide adjustment notices between 210 and 240 days prior to the new payment schedule taking effect.
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