Understanding Mortgage Options And the Comeback of the ARM

The Weekly Recap

Good morning and happy Friday! Mortgage rates fell again this week to their lowest level in almost a year as application for refinancing are up 23%. Treasury Sec Bessent wants the Fed to cut rates at least 150 bps, Manhattan rentals hit another record high this month, 10k new apartments are slated for Midtown and Europe is finally getting in on air conditioning. Plus, Taylor Swift announced a new album so the US Economy will probably grow another 1% in GDP in Q4.

If you missed last weeks newsletter on Why the Jobs Number Revision Was Such a Gut Punch to Real Estate, you can read that through the link.

Understanding Mortgage Options and the Comeback of the ARM

To preface this, I am in no way, shape or form a mortgage professional. I do however talk with bankers every day about what they are seeing in the marketplace and how their institutions are positioning themselves competitively against others in order to win new business. One of the universal things I hear is how often new homebuyers are surprised by other financing products that are available offering lower rate opportunities.

When you start shopping for a home, one of the first big decisions is choosing the right mortgage. Fixed-rate loans are the classic choice, your interest rate and monthly payment stay the same for the life of the loan, usually 15 or 30 years. It’s predictable, and for many buyers, that’s comforting. But there are other options, like adjustable-rate mortgages (ARMs), which start with a lower fixed rate for a set period (often 5, 7, or 10 years) before adjusting based on the market. In NYC the average person lives in their home 5-7 years before upgrading, which may make an ARM more appealing for some.

Buyers can lock in a lower payment now and plan to refinance or sell before the rate adjusts. Plus, today’s ARMs come with built-in safeguards, like caps on how much your rate can increase each year and over the life of the loan, which helps keep surprises in check.

Recently, ARMs have been making a quiet but noticeable comeback. ARM applications have more than doubled since early 2022, now accounting for over 7% of new mortgages. In today’s market, fixed rates are hovering in the mid-6% range, while ARMs often come in significantly lower at the start. That difference can mean hundreds of dollars saved each month.

If you’re looking for maximum stability, a fixed-rate loan is still a solid choice. But if you want lower upfront costs and you’re confident you’ll move or refinance in a few years, an ARM could be worth exploring, especially while rates are still above 6%.

If you’d like to explore further, feel free to reach out and I would be happy to connect you with several mortgage partners to rate shop and see what product would work best for you!

Market Performance

Here are how some other indexes and asset classes have performed as of this morning’s opening bell.

NYC Market Update

Here is a view of NYC market activity over the past month.

Mortgage Rate Update

The average 30-year fixed-rate mortgage fell for the fifth consecutive week and dropped to its lowest level since October. Purchase application activity is improving as borrowers take advantage of the decline in mortgage rates.

News You Can Use

• Manhattan Apartment Hunters Face Record Rents and Bidding Wars Bloomberg

• Why It’s Actually a Good Time to Buy a House According to a Zillow Economist Bloomberg

• Mortgage Rates Slip to Lowest Level of 2025 Wall Street Journal

• Potential Fed Chair Pick David Zervos of Jefferies Backs Aggressive Interest Rate Cuts CNBC

• Bessent Urges Fed to Lower Rates By 150 Basis Points or More Bloomberg

• Consumer Prices Rise 2.7% Annually in July, Less Than Expected CNBC

• Inflation Report Boosts Prospects for Fed Rate Cut in September Investopedia

• Weekly Mortgage Re-finance Demand Shoots 23% Higher WoW CNBC

• US Small Business Optimism Rises to Five-Month High on Economy Bloomberg

• 10k New Homes Slated for Midtown Due to Imminent Rezoning Gothamist

• A $340 Million New York Office Makeover is Converting Boardrooms to Bedrooms Bloomberg

• Europe Finally Embraces Air Conditioning Bloomberg

The Deep Insight

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