Adjustable-rate mortgages (ARMs) are making a comeback.

Many multifamily borrowers, especially short-term holders, are pursuing floating-rate debt again, attracted by the incredibly low rates, said panelists at the recent Apartment Finance Today Conference.

“We’re seeing much more activity on a floating rate basis than we have the last few years; I’m surprised to see the level of interest given where fixed rates are,” said Mike McRoberts, vice president of multifamily production at McLean, Va.-based Freddie Mac. “Borrowers like the flexible pre-pay and some people think the short rates are going to be down for quite a period.”

Last year, the ultra-low rates being offered on the fixed-rate side tempered some of the pricing advantage of floating-rate debt. But unlike the yield on the 10-year Treasury, which saw a sudden rise at the end of 2010, the floating-rate benchmark continues to hover at historic lows. The one-month LIBOR rate was at 22 basis points (bps), and the three-month rate at 28 bps, as of April 11, and it hasn’t swayed much from those figures over the last year.

Freddie Mac’s Capped ARM program won a lot of floating-rate market share over the last few years, but has seen some very healthy competition recently from its familiar foe. “Fannie Mae’s structured ARM has made a rousing comeback and is very competitive now,” says Mitchell Kiffe, co-head of origination for Los Angeles-based CB Richard Ellis Capital Markets, in a telephone interview. “The investor demand for that paper has increased hugely.”

In general, lender spreads from banks and Freddie Mac are around 300 bps over LIBOR, leading to all-in rates around 3.25 percent on seven-year deals. But Fannie Mae’s program has undercut that a bit, offering spreads in the low-200 bps range, leading to all-in rates in the mid- to high-2 percent range.

And it’s not just the agencies and banks offering low floating rates: Life insurance companies are increasingly offering ARMs as well. MetLife, for instance, offers three- to five-year floating rate money, and has seen much more interest of late, especially given that its pricing is so competitive. “The floating rate money is going to be pretty much in the 2 percent range, all-in, on coupon right now, depending on leverage,” said John Martin Hall, a director at New York-based MetLife Real Estate.

Fixed-rates continue to stay historically low, with seven-year mortgages from the GSEs still under 5 percent, and 10-year money in the low-5 percent range, as of mid-April. But for short-term borrowers positioning their assets for a sale, ARMs allow much more exit-flexibility than fixed-rate programs which often feature potentially large exit fees.

“It’s a very attractive time to float right now, and we’re looking really hard at floating on some of our recent acquisitions,” said Mark Hafner, managing director of investments for Charleston, S.C.-based Greystar. “We’re doing floaters both through the agency products as well as some with the larger banks.”