Bay Area Mortgage Explainer · Week of August 5, 2026
By Chris Johnson, Associate Broker · Affinity Mortgage · San Jose & Santa Clara County
If you've shopped for a mortgage in the last few months, you've probably noticed something: adjustable-rate mortgages, or ARMs, are back in the conversation. Nationally, ARM volume has climbed to its highest level since 2023, and I'm fielding more questions about them from Bay Area buyers than I have in years.
That's not an accident. ARM applications are up sharply year-over-year as buyers look for ways to make today's rate environment pencil out, especially here in Santa Clara County where the median purchase is a jumbo loan by default. Let's walk through what's actually driving this, and — more importantly — how to know if an ARM makes sense for your situation.
The backstory
The math is simple: ARMs are pricing meaningfully below fixed-rate loans right now. As of this week, the average 30-year fixed sits in the mid-6% range, while 5/1 ARM rates are running roughly half a point to three-quarters of a point lower. On a $1 million-plus loan — a normal purchase price in much of Santa Clara County — that spread can mean several hundred dollars a month in savings during the initial fixed period.
There's also a behavioral shift. A lot of today's ARM borrowers are choosing them deliberately, not out of desperation, betting that rates ease in the next few years or planning to sell or refinance before the adjustable period kicks in. It's a "buy now, refinance later" mindset rather than the reach-for-anything borrowing that characterized ARMs before 2008.
The basics
An ARM starts with a fixed introductory rate for a set number of years — most commonly 5, 7, or 10 — and then adjusts periodically based on a market index. A "5/1 ARM" means your rate is locked for 5 years, then can adjust once a year afterward.
Modern ARMs come with rate caps built in — typically structured like 2/2/5 or 5/2/5 — that limit how much your rate can move at the first adjustment, at each adjustment after that, and over the life of the loan. This is one of the biggest differences from the pre-2008 era, when caps were looser or absent entirely and disclosure was inconsistent. Today's ARMs are underwritten and disclosed far more conservatively.
The decision
Bay Area note: Because so many Santa Clara County purchases fall into jumbo territory, the dollar impact of choosing an ARM over a fixed-rate loan is often larger here than the national averages suggest. If you're comparing offers on a $1.5M+ property, it's worth having me run both scenarios before you write an offer.
Current as of August 6, 2026
30-Yr Fixed ~6.67% | 15-Yr Fixed ~5.98% | 5/1 ARM (APR) ~6.20% |
Jumbo 30-year fixed is averaging closer to 6.8% nationally this week — one more reason the ARM conversation matters even more for Bay Area buyers.
Rates shown are national market averages as of August 6, 2026 (Bankrate). They change daily and your actual rate depends on credit profile, loan size, down payment, and property type. This is not a rate quote or a commitment to lend.
Common questions
Are ARMs safe now, or is this like 2008 again?
Today's ARMs are structurally different from the pre-crisis products. Rate caps are standard, underwriting is stricter, and lenders are required to qualify you based on what you could realistically pay after adjustment — not just the low intro rate.
How much could my payment actually go up when it adjusts?
It depends entirely on your loan's specific cap structure — commonly 2/2/5 or 5/2/5 — which limits the increase at first adjustment, at each adjustment after, and over the life of the loan. I'll walk you through your exact worst-case number before you commit to anything.
Is an ARM a good fit if I might sell or refinance in a few years?
This is often exactly the buyer profile where an ARM makes the most sense. If you hold the loan mostly within the fixed-rate period, you capture the savings without ever facing an adjustment.
Should I wait for rates to drop further instead of choosing an ARM now?
Timing the market perfectly isn't realistic for most buyers. An ARM is one way to make today's affordability work without betting your whole plan on a future rate drop — you can always refinance later if fixed rates fall.
Wondering if an ARM makes sense for your specific numbers?
I'll run your ARM and fixed-rate scenarios side by side so you can see real numbers, not averages.
Start Pre-ApprovalBook a CallChris Johnson | Associate Broker | Affinity Mortgage | NMLS #235072
(408) 687-6109 · chris_j@ouraffinity.com · caliloanpro.com
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Chris Johnson | Associate Broker | Affinity Mortgage | NMLS #235072 | Affinity Mortgage NMLS #252576 | 2542 S Bascom Ave, Suite 185, Campbell, CA 95008 | Equal Housing Lender. This article is for informational purposes only and does not constitute a commitment to lend. Loan approval is subject to credit approval and program guidelines. Interest rates and program terms are subject to change without notice and are not guaranteed. Rate and payment examples in this article are illustrative only and not a quote for any specific loan.
