More borrowers are turning to adjustable-rate mortgages to save money as interest rates climb, a new Zillow analysis found.

The share of applications for ARMs hit 12.6% in June and 12.2% in July. Those are the first months ARMs eclipsed 12% of all mortgage applications since August 2007.

ARMs were a popular option for borrowers during the high-risk lending practices that led up to the Great Recession.

Zillow noted that in 2021 the typical borrower using an ARM — which offers a lower, introductory mortgage rate that could rise or fall later — had a higher income ($165,000 compared to $91,000) and down payment (23.6% vs. 10%) than the typical buyer on a fixed-rate mortgage. 

“Housing market conditions and the profile of ARM borrowers should bring comfort to anybody scarred by the memory of risky lending practices during the Great Recession,” Zillow senior economist Nicole Bachaud said in the report. “It’s important not to confuse some added risk for an individual borrower with risk to the housing market as a whole. Borrowers today are more financially prepared for home buying, and the housing market has a much stronger outlook than the last time ARMs were this popular.”