The adjustable rate is back.
Read the reset first.

Last Thursday the Freddie Mac 30 year average jumped from 7.03% to 7.28% in a single week. That is the highest it has been since November 2023. A year ago the same number was 6.34%.

When fixed rates move like that, the same thing happens every time. Buyers start asking about adjustable rate mortgages, and loan officers start quoting them, because the starting payment looks a lot better. It is already showing up in the data. I want to walk through what an ARM actually saves you on a normal King County house right now, what it can cost you later, and one qualifying rule that almost nobody explains to buyers before they fall in love with the lower payment.

I am not anti ARM. I am anti picking one because the first number on the quote was smaller.

What happened last week

These are national numbers, not a Seattle measurement. But the rate you get in Seattle comes off the same national market, so they apply here.

Freddie Mac's survey put the 30 year fixed at 7.28% on 1 October, up a quarter of a point in one week. The Mortgage Bankers Association's weekly survey, for the week ending 25 September, showed total applications down 6% in a week. Purchase applications were down 14% from a year ago. And adjustable rate loans rose to 10.3% of all applications, the highest share since October 2025.

So people are not just sitting out. Some of them are switching products to make the payment work. That is the part worth slowing down on.

The real spread, not the advertised one

The MBA survey gives both rates from the same lenders in the same week, which makes it a fair comparison. The average 30 year conforming fixed was 7.30% with 0.75 points. The average 5/1 ARM was 6.47% with 1.20 points.

Two things in there matter. The gap is 0.83 of a point, which is real. But the ARM came with more points, meaning more cash at closing to get that rate. Quotes that lead with the rate and bury the points are not giving you the whole deal.

To put dollars on it, I ran both through the King County median. These are my calculations, not a lender quote. Assumptions: the NWMLS August median sale price for King County of $845,000, 20% down, a $676,000 loan, principal and interest only, using the MBA rates and points above.

The 30 year fixed at 7.30% comes to about $4,634 a month. The 5/1 ARM at 6.47% comes to about $4,259 a month. That is $375 a month less with the ARM, or about $22,500 over the first five years. Because more of each ARM payment goes to principal, you would also owe about $5,700 less at the end of year five. Against that, the ARM's extra 0.45 points cost about $3,000 more at closing.

If you sell or refinance before the five years are up, the ARM puts you roughly $25,000 ahead on this example. That is the honest best case, and it is a good one.

Now look at year six

Here is the part the quote does not show you. After the fixed period, the rate resets to an index plus a margin the lender sets, subject to caps. A common structure on a five year ARM is 2/1/5: the rate can rise up to 2 points at the first reset, up to 1 point at each reset after that, and never more than 5 points above where it started. The margin is typically 2% to 3% and it does not change for the life of the loan. Your loan's caps and margin may be different, so read the disclosure.

On the same loan, assume the worst at each step. Starting at 6.47%, the first reset could take you to 8.47%. On the roughly $632,600 you would still owe, over the 25 years left, that is about $5,081 a month. That is $447 a month more than the fixed payment you passed on. At the next reset it could be 9.47%, or about $5,514. The lifetime ceiling is 11.47%, which is about $6,416 a month.

Nobody can tell you where rates will be in 2031, including me. The reset could just as easily come in lower than today. The point is not that the worst case will happen. The point is that you are signing for it, and you need to be able to live with it if your plan to sell or refinance does not work out.

The qualifying rule nobody mentions

This is the one that trips people up. A lot of buyers think an ARM will let them qualify for more house because the payment is lower. On a five year ARM it usually will not.

Under Fannie Mae and Freddie Mac guidelines, for an ARM with a fixed period of five years or less, you qualify at the higher of the note rate plus 2 points or the fully indexed rate. On our example that means the lender underwrites you as if your rate were 8.47%. On the full $676,000 loan that is a payment of about $5,183 a month. That is $549 a month more than the fixed rate payment you would qualify on.

So on a conventional loan, the five year ARM can actually make it harder to qualify, not easier. ARMs with a fixed period longer than five years, like a 7/6 or a 10/6, qualify at the note rate. But those usually carry bigger first reset caps, often 5/1/5, which means the first adjustment can move up to 5 points at once. You trade one problem for another.

If someone is pitching you an ARM specifically as the way to stretch into a bigger house, ask them which rate you are qualifying at. The answer tells you a lot.

Where an ARM makes sense here

There are buyers in this market for whom an ARM is the right call, and I would tell them so.

You know you are leaving. Plenty of relocation buyers come here on a defined assignment, or already know this is a three or four year stop. If you are confident you will sell before the reset, paying for thirty years of rate certainty you will not use is money left on the table.

You are buying above the conforming limit. In King, Snohomish and Pierce counties the 2026 conforming limit for a single family home is $1,063,750. Above that you are in jumbo territory, where lenders price ARMs on their own terms and the spread to a fixed rate can be wider or narrower than the national averages above. At the price points a lot of my clients buy at, that is the normal case, and it is worth getting both quoted side by side.

You have real reserves. If you could carry the year six worst case payment out of income or savings without changing how you live, the ARM's downside is uncomfortable instead of dangerous. That is a very different position from a buyer who can only make it work at the starting rate.

Where I would not use one: a buyer stretching to the top of their budget, a buyer whose whole plan is "I will refinance when rates come down," or anyone who has not read the caps. Refinancing is not a plan. It depends on rates falling, on your income and credit still qualifying, and on the house still appraising. Any one of those can fail.

The bigger picture for sellers

If you are selling, this matters to you too. Every buyer who could afford your house at 6.3% a year ago and now cannot is a buyer missing from your showings. The ones still shopping are doing the payment math harder than they were. Pricing to the payment a buyer can carry at today's rate, not the price your neighbor got last spring, is the conversation I would rather have up front than after sixty days on the market.

I covered how payment math cuts against relocation buyers in an earlier piece on moving to Seattle in 2026, and how to get a builder to pay down your rate in the buydown breakdown. Both still apply, and both got more expensive last week.

What I would actually do

• Get a fixed rate and an ARM quoted by the same lender on the same day, with points and fees on both. Compare total cash at closing, not just the rate.
• Ask for the margin, the index and the caps in writing. Then calculate the payment at the first reset cap and at the lifetime cap. If the lifetime cap payment would break you, the ARM is not for you.
• Ask what rate you are being qualified at. On a five year ARM, expect it to be the note rate plus 2.
• Match the fixed period to how long you honestly expect to own. If you think it is five years, take a seven or ten year fixed period for margin, not a five.
• If you are buying above $1,063,750, get jumbo quotes from more than one lender. Jumbo ARM pricing varies more than conforming pricing does.
• Do not count on a refinance to rescue the deal. Treat it as a bonus if it happens.

If you are buying in King, Snohomish or Pierce County and trying to decide which loan fits how long you will really be here, I am glad to run it on your actual numbers with you. That is a conversation worth having before you lock anything.