ARMs of mass destruction?

He said: “We should make sure that lenders don’t go overboard and that adjustable-rate mortgages, if they are going to be originated, are only originated to people who absolutely can afford them, and they aren’t used as a sort of a band aid or crutch to just start originating more loans.

“It’s something that we have to keep a very close eye on, because it’s gotten us into a lot of trouble in the past, and we obviously don’t want a repeat of 2008.”

Channel’s pointed remark was in reference to the role ARMs played in the great economic crash 14 years ago, which sparked the collapse of the housing market and left millions of people with mortgages they could no longer pay, mostly because they were given ARMs they could barely afford even with initial low rates.

Channel stressed that there were “plenty of examples” of borrowers today being able to pay off ARMs and not defaulting, adding that lenders were also “a lot more diligent” and stringent than before the collapse of 2008, but he warned that “just by their very nature, because there’s more unpredictability baked into them”, they were riskier than a fixed-rate mortgage.

Nonetheless, the trend in ARMs looks set to continue, reflected by the fact that big lenders such as UWM and Homepoint have been launching new adjustable-rate mortgage products over the last six months.