Adjustable-rate mortgages are making something of a comeback. Last week they made up nearly 10% of all mortgage applications, nearing a post-pandemic high, per the Mortgage Bankers Association.

However, today’s adjustable-rate mortgages are a little different from what you may remember.

These days, most adjustable-rate mortgages lock in lower introduction rates for five, seven or 10 years. The late-aughts teaser rate mortgages, which reset much faster and were loaned to anyone with a pulse, are pretty much gone.

“The kinds of mortgages that are being originated today are considerably safer than those that were originated during the housing boom,” said Wharton School real estate professor Ben Keys.

As of last week, the average interest rate on an adjustable-rate mortgage that resets after 5 years was 5.4%, a full percentage point lower than the traditional 30-year fixed.

Economist Michael Fratantoni at the Mortgage Bankers Association said that could be the difference between an affordable and unaffordable home, especially in pricier markets. 

“Borrowers getting a larger loan are much more likely to go to that adjustable rate because on a dollar basis, it saves them more on their monthly payments,” Fratantoni said.

Many adjustable-rate borrowers think they’ll sell or refinance their home before the introductory rate lapses.

But Zillow economist Kara Ng said sure, rates feel high now — but they can get higher.

“My concern is you're if you're going after an adjustable-rate mortgage purely for an affordability play, that's dangerous,” Ng said.

Ng said she’s also worried borrowers don’t understand what an adjustable rate actually means. She said Zillow has done research looking at internet searches of the term.

“What we found is a lot of the search terms aren’t about what is an adjustable-rate mortgage, it’s more about the current rate,” said Ng. “Which means people are looking to transact soon.”

And not necessarily researching what the transaction means.