Key facts
- 3.1 million active first-lien ARMs are currently in place, the highest in 5.5 years.
- ARMs account for 5.6% of all active mortgages.
- Approximately 84,000 ARMs had reset through July 2026, with another 64,000 by year-end.
- About 200 basis points increase in payments is possible for some 5/1 ARM borrowers in 2027.
- Roughly 74,000 seven-year ARMs originated in 2020 could see a median payment increase of $1,066 per month (36%).
- Post-crisis underwriting standards require borrowers to qualify at the fully indexed rate.
A new wave of adjustable-rate mortgage (ARM) resets is anticipated to peak in 2027, potentially increasing payments for a segment of borrowers. However, data from Intercontinental Exchange (ICE) and Optimal Blue indicates that these resets are unlikely to trigger a systemic threat to the broader U.S. mortgage market or economy.
Currently, there are 3.1 million active first-lien ARMs, the highest level in five and a half years, representing 5.6% of all active mortgages. According to Andy Walden, head of mortgage and housing market research at ICE, most newer ARMs are still within their initial fixed-rate periods, meaning only about a third of active ARMs have begun adjusting.
ICE data shows that 84,000 ARMs had reset by July 2026, with an additional 64,000 scheduled for the remainder of the year, totaling 148,000 for 2026. Projections indicate a rise to 186,020 resets in 2027, followed by a decrease to 154,710 in 2028. These figures are dynamic, influenced by new ARM originations and borrower actions like refinancing or selling.
ARM usage had significantly declined to about 1% of rate lock volume in December 2020, when fixed mortgage rates were at historic lows. As mortgage rates climbed in 2022, ARM volume saw a resurgence, particularly with 5/1 and 7/1 products, reaching 12.6% of total lock volume in October 2022. Brennan O’Connell, director of data solutions at Optimal Blue, noted that the first batch of ARM borrowers are likely six months away from resetting, following the Federal Reserve's rate hikes starting in spring 2022.
Borrowers who took out ARMs in early 2022 secured rates considerably lower than current levels, with average ARM rates around 3.84% in March 2022 and 4.28% in April 2022. O’Connell anticipates that a substantial number of 5/1 ARMs resetting in 2027 could see payment increases of up to 200 basis points compared to their current payments.
ICE data indicates that over 90% of ARMs originated since 2022 are still within their initial fixed periods. While overall reset counts in 2027 are expected to be manageable within the broader market context, individual borrowers may face significant payment adjustments. For instance, approximately 74,000 seven-year ARMs originated in 2020 are expected to experience the largest median payment increase, around $1,066 per month (36%), due to lower initial rates, larger balances, and higher periodic rate caps. Another 65,000 borrowers with five-year ARMs from 2022 could see a $430 (+22%) increase.
ARMs typically offer lower initial payments, which increases their popularity when mortgage rates are high. However, this upfront relief can lead to higher payments when the introductory period ends. Despite ARMs recently accounting for over 11% of mortgage rate locks, their borrowers are generally better positioned than those prior to the 2008 financial crisis, due to stricter post-crisis underwriting standards that require qualification at the fully indexed rate, mitigating severe payment shock and default risks.