The current size of the average fixed-rate mortgage in the U.S. was $280,900, while the size of the average adjustable-rate mortgage (ARM) was $688,400, per Mortgage Bankers Association data.
Why does this matter? That current ARM balances are twice the size of traditional fixed-rate mortgages serves as a reminder that mortgage loan products are paving the way for homebuyers to access the market, albeit with "artificial" affordability, Realtor.com reports, and current originations are climbing toward peak levels, last achieved during the Great Recession. ARMs do have larger balances than do traditional products, and MBA chief economist Mike Fratantoni explains that buyers at both low and high ends of the market may use them to get into their home, leaving refinancing for later.
Karan Kaul, an Urban Institute researcher, called the recent explosion in the size of ARMs “ironic” for their similarities to the bubble era, but said that things are very different now. Perhaps most important, Kaul thinks, is the contrast between the fundamentals of the two markets. A decade ago, speculation and greed drove up prices, whereas now, in a supply-starved market, “demand” might be just as easily characterized as “need” for housing, of any kind.
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