150,000 U.S. ARM borrowers may face sharp rate hikes and much larger monthly payments

Borrowers are returning to adjustable-rate mortgages while fixed loan costs stay elevated.

For homebuyers trying to keep a purchase within budget, the lower upfront cost of an adjustable-rate mortgage can seem attractive. But about 150,000 homeowners are expected to discover the downside when they hit their first reset in 2026. Their median rate could rise from 3% to 6.06%, pushing the typical monthly payment up by $1,080.

What to know

Realtor.com, citing ICE Mortgage Technology estimates, said there is also a large wave of first-time ARM resets ahead, with another 186,000 expected in 2027 and 155,000 more in 2028.

As fixed mortgage rates remain high, borrowers are once again turning to ARMs. Realtor.com said adjustable-rate loans accounted for 10.3% of mortgage applications in late September, up from 7% and the highest share since October 2025. On October 15, the average 30-year fixed mortgage rate stood at 7.4%, while Bankrate put the national average APR at 6.57% for a 5/1 ARM and 6.95% for a 10/1 ARM.

ARMs usually start with a lower rate than fixed mortgages, but once the introductory period ends, often after five, seven, or 10 years, the rate can move higher.

More context

ICE data cited by Realtor.com shows that a borrower with a seven-year ARM from 2019, who began at 3% and still owed about $548,000 when the first adjustment arrives in 2026, could see a median rate of 6.06%, increasing the monthly payment.

By comparison, a buyer who chose a 30-year fixed mortgage in 2019 at that year's average rate of 3.94%, according to Freddie Mac data, would have paid $3,093.70 per month over the following seven years using the same home price assumptions. That is nearly $600 less each month than the ARM borrower would pay.

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Realtor.com's analysis estimates that the fixed-rate borrower would spend about $259,786.77 over that period, nearly $50,000 less than the ARM borrower. It also says the fixed-rate borrower would reduce principal faster, ending 2033 with a balance of $439,952.52, or about $12,341 less than the ARM borrower.

What can be done?

The analysis says the result depends on the timing of the first reset, the unpaid balance at that point, and the caps that limit how much the rate can increase.

A higher payment is not inevitable for every ARM borrower. ICE found that some three-year ARMs from 2023 could reset lower, moving from a median starting rate of 8.38% to a projected 7.71% with about $136,000 still outstanding.

In that scenario, Realtor.com's analysis says the monthly payment would drop by $124, or $4,464 over the next 36 months. It also projects another $5,063.34 would go toward principal, leaving a balance of $130,936.66 by 2029.