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Embracing ARMs And Battling Members’ Misconceptions




With adjustable-rate mortgages back in fashion, credit unions are educating members about the ins and outs of these products, dispelling misunderstandings along the way.

With housing stock low, home prices high, and interest rates showing no signs of coming down, many credit unions are turning to adjustable-rate mortgages to help would-be borrowers find a home. ARM loans gained a bad reputation after the 2008 housing crisis and the Great Recession, but credit union leaders insist that with the right education and a clear understanding of how the product works, adjustable-rate mortgages can be an ideal solution for would-be homeowners.

The Big Picture53% of those who don’t own a home believe homeownership is out of reach, according to a study from Northwestern Mutual.
58% of millennials feel this way, but roughly half of baby boomers and Gen X share the sentiment.
According to Federal Reserve data, the average price of a home topped $510,000 at the end of 2024. That’s 32% higher than five years ago.

Realtor.com expects a 3.7% increase in home prices for 2025 — down 30 basis points from last year — but tariffs could increase the cost of new home construction by as much as 10%.

“ARM” Isn’t A 4-Letter Word

The high interest rate environment led Tucson Federal Credit Union ($749.4M, Tucson, AZ) to roll out Fixed4Five, an ARM option that offers a 5% fixed rate for the first five years. After that period, the loan adjusts on a five-year basis with increases capped at two percentage points and a five-point limit over the life of the loan. The intent, explains Ashley Kemp, vice president of lending and solutions, is to make homeownership more accessible and affordable for members.

“ARM was such a bad word for so long after 2008-2009,” Kemp says. “People didn’t want to hear about it. But our branch staff is comfortable talking through this product with members so they feel comfortable.”

That said, the credit union isn’t about to force members who aren’t comfortable with ARMS into one. Traditional fixed-rate mortgages are available for borrowers who are more comfortable going that route or in instances where it makes more sense than an adjustable option.

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