Final answer:
It is false to claim that adjustable rate mortgages (ARMs) have no limits on rate increases. ARMs have caps that provide some protection to borrowers, although rates vary with market rates or inflation.
Step-by-step explanation:
The statement that there is no limit on how much and how fast adjustable rate mortgages (ARMs) can increase is false. ARMs do typically have caps that limit the interest rate increases both annually and over the life of the loan. While it is true that ARMs have interest rates that vary with market interest rates or inflation rates, borrowers also have some protection against drastic increases. For instance, an ARM might start with an introductory rate and then adjust based on a specific index like the prime rate or LIBOR plus a margin. However, there are usually caps that prevent the interest rates from rising too quickly or too high. It's important for borrowers to understand the terms of their ARM, including the initial rate, adjustment period, index, margin, and caps.