Adjustable-rate mortgages make a comeback in the Bay Area, but there are risks

October 9, 2026 - 09:16

Real estate agents say more people want the freedom to adjust in today's high and climbing mortgage rate market. Adjustable-rate mortgages, once blamed for contributing to the 2008 housing crash, are finding new life in the Bay Area as buyers struggle with affordability.

An adjustable-rate mortgage typically offers a lower fixed interest rate for an initial period, often five, seven, or ten years. After that window closes, the rate resets periodically based on market conditions. For buyers stretching to afford a home in a region where median prices remain well above one million dollars in many counties, the lower starting payment can make the difference between qualifying for a loan and being priced out entirely.

Lenders report growing interest in these products. Some buyers plan to sell or refinance before the fixed period ends, betting that rates will fall or that their incomes will rise. Others simply need the smaller monthly payment now.

The risks are real. If rates climb after the initial period, payments can jump sharply. Buyers who cannot afford the higher amount may face difficult choices. Financial advisers suggest borrowers calculate worst-case payments before signing and confirm they could handle a reset. For some, the gamble pays off. For others, it becomes a burden.