Approximately 150,000 borrowers holding adjustable-rate mortgages are scheduled to experience their first interest rate adjustment this year, according to data from ICE Mortgage Technology. An additional 186,000 face adjustments in 2027 and 155,000 in 2028. Of this year’s total, roughly 64,000 adjustments are anticipated between August and December. The substantial increase in market rates since many of these mortgages were originated means borrowers could see monthly payments rise significantly, potentially by more than $1,000 in some cases, though a smaller segment may experience rate reductions.
ARMs currently represent about 5.6% of the approximately 55.4 million active mortgages in the United States. The nation has 3.1 million outstanding ARMs, the highest volume in 5.5 years. Of these, 2.05 million remain in their initial fixed-rate period, while 1.05 million have already transitioned to their adjustable phase. ARMs typically feature a lower introductory rate in exchange for the risk of future rate increases. After the initial period—commonly five, seven, or ten years—rates adjust periodically, usually annually or semi-annually.
Borrowers who obtained seven-year ARMs in 2019 with a median initial rate of 3% face particularly substantial increases. With median unpaid balances around $548,000, these borrowers are projected to see median adjusted rates of 6.06%, translating to median monthly payment increases of approximately $1,080. Conversely, some borrowers originating ARMs in 2023 at higher initial rates may see their payments decrease.
For homeowners seeking relief, refinancing into fixed-rate mortgages represents a primary option, though this involves closing costs typically ranging from 2% to 5% of the loan amount. Lenders must notify borrowers seven to eight months before the first adjusted payment becomes due. Housing counselors through the Department of Housing and Urban Development can assist those concerned about affordability or seeking loan modification options. Mortgage professionals note that some borrowers with improved financial circumstances can absorb higher payments, while others face significant strain.
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