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April 05, 2024

A Guide to ARM Rates: What to Expect With Your 2024 Mortgage

ARMs offer a unique option for homebuyers with their tempting low introductory rates. But are they the right choice for you? This guide dives into the nitty-gritty of ARMs in 2024, including expert predictions for falling rates throughout the year. Is an ARM the key to saving money on your dream home? Click to find out and explore the pros and cons, how to get the best rates, and why a 5-year ARM might be the perfect fit for you! Don't miss out, explore your ARM options today!

This blog is for educational purposes only, not an offer of credit or advertisement for current loan terms. It does not provide legal advice. Refer to our loan web pages or consult professional advisors for specific information.

Adjustable Rate Mortgages (ARM for short) are one of the most popular mortgage choices for homebuyers today. But is it the right choice for you?

One of the best aspects of the American home lending industry is an ever-evolving landscape of financing options. If you’re looking to buy a home, there are many choices to achieve it.

However, the flip side of that wide selection means you’re not sure which way to turn, especially when it comes to the dynamic nature of mortgage rates. What’s down today may be up tomorrow and vice-versa.

Start your application with MIDFLORIDA Credit Union.

ARMs are the go-to choice for many homebuyers

With today’s economic uncertainties, it’s not surprising why adjustable-rate mortgages stand out as a versatile option for many borrowers.

Unlike their fixed-rate counterparts, ARMs offer an initial period with a lower interest rate, which can adjust over time based on market conditions.

As we look ahead to 2024, understanding the current state and future predictions of ARM mortgage rates is crucial for anyone considering this type of loan.

MIDFLORIDA is here to assist you, providing competitive rates and ARM mortgages.

Current ARM mortgage rates and predictions for 2024

The current ARM rates reflect a market that's constantly responding to economic indicators, Federal Reserve policies, and global financial trends.

For example, the IMF predicts that 2024 inflation will remain elevated due to war-induced commodity price increases, with global advanced economies projecting at 5.7% and emerging markets at 8.7%.

Uncertainties, they forecast, would persist due to supply-demand imbalances from the war and the lingering impacts of COVID-19.

Beyond 2023, global growth is expected to decline further to about 3.3% over the medium term.

This is just one example of how global events will influence major economic players’ actions and, ultimately, how much you’ll likely spend purchasing your home.

How ARM rates are looking for 2024

In 2024, expert mortgage rate predictions are showing a variety of forecasts, with most indicating a decline throughout the year.

Fannie Mae, published a prediction that the 30-year fixed-rate mortgage to average around 6% to 7% in the first quarter, gradually decreasing to approximately 5.5% by the end of the year.

However, they caution that uncertainties persist due to various economic factors, including inflation and global events.

Some potential events in 2024 that could cause global economic instability include:

  • Escalation of conflicts, such as in the Middle East, could lead to a surge in oil prices, potentially resulting in financial crises in some countries.
  • A slowdown in China's economic growth could have ripple effects on global trade and commodity prices, impacting both exports and domestic economies.

However, although there are always possible events that can go awry, the indicators they point to show that 2024 still has great potential as a favorable time for homebuyers and those considering refinancing.

Understanding ARM mortgages

ARM mortgages offer budget-conscious homebuyers a different path from fixed-rate mortgages—an initial interest rate that remains constant for a predetermined period, after which it adjusts at regular intervals.

Note: This structure is particularly appealing for those anticipating a short-term stay in their home or expecting an increase in future income.

Key terms to understand ARMs include:

  • The adjustment period (the frequency of rate changes)
  • Rate caps (limits on how much the interest rate can change)
  • The index (a benchmark interest rate to which the ARM is tied)

These components play a decisive role in determining how an ARM adjusts and limits fluctuations in monthly payments.

The pros and cons of choosing an ARM mortgage

Deciding whether an ARM is a good idea for you hinges on carefully evaluating its advantages and disadvantages.

The biggest advantage of adjustable-rate mortgages (ARMs) is how they offer lower initial rates, potentially saving significant money during the initial period and allowing for larger loan amounts.

Monthly payments can decrease if market rates fall—as some predict in 2024, as shown above—or they may increase if rates rise after the initial fixed period.

ARMs are complex, requiring careful planning for rate adjustments and potential payment increases.

If you choose to include caps or limit rates, they can provide some protection. Furthermore, if you have the option to sell or refinance before rate adjustments kick in, then ARMs could be a viable option for you.

Spotlight on 5-Year ARM rates

The 5-year ARM holds a unique and popular position in available mortgage options, offering a hybrid blend of stability and flexibility.

The main features of 5-year ARM are:

  • They maintain a fixed interest rate for the first five years
  • After that, they transition to an adjustable rate that changes with market conditions

This initial period of stability makes 5-year ARMs particularly appealing to homeowners who plan on selling or can project an ability to refinance before the adjustable phase begins.

Securing the best ARM mortgage rate

Borrowers should always be on the lookout for the best ways to maximize their savings and manage their financial risks.

Getting the best ARM mortgage rate available will go a long way in achieving both.

  • Improving your credit score is one critical strategy, as higher scores often secure lower interest rates.
  • Shopping around with multiple lenders can reveal a range of rates and terms, enabling borrowers to find the best deal.
  • Understanding the details of your loan agreement, especially the rate caps and adjustment periods, is also crucial.

Factors like these can significantly impact your financial situation over the life of the loan, making it important to choose a loan that aligns with your financial stability and plans.

ARM mortgages in 2024: Conclusion

As homebuyers look at the remainder of 2024, understanding the nuances of ARM mortgage rates could be the key to finding the right financial solution for their home. Whether it's the appeal of a 5-year ARM's initial stability or the strategic financial planning involved in securing the best rate, informed decision-making is key.

The potential benefits of ARM loans, coupled with the right guidance and support, can offer a viable path to homeownership.

Ready to explore your ARM mortgage options?

Backed by our commitment to your financial success, MIDFLORIDA offers ARM mortgages that may best align with your life's financial and lifestyle goals.

Start your application with MIDFLORIDA today.

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