"There are people who are buying homes that they shouldn't buy," said Eric Appelbaum, president of the Apple Mortgage Corporation in Manhattan. "People are saying, I can afford it on interest-only but I can't afford it" with a traditional mortgage, Mr. Appelbaum said. "It doesn't make any sense."

Since borrowers with interest-only mortgages are not yet paying down their debt, they are hoping to build up equity through an increase in home values. If house prices fall, as they did during the early 90's in some cities, borrowers will forced to bring money to the table when they sell.

Even if home prices rise a little, borrowers who have taken out option ARM's and made only minimum payments for five years could find themselves in a hole. Such loans, which are typically based on rates that adjust monthly, give homeowners four payment options each month. In the first quarter of 2005, 70 percent of option ARM borrowers made the minimum payment, according to UBS.

In doing so, those borrowers effectively added more debt to the back of their loans.

On a $400,000 loan, for example, a buyer who made only minimum payments over the first five years would add more than $27,000 to the end of the loan, assuming short-term rates increase by one percentage point over the course of the loan, said Robert Binette, a mortgage broker with Hamilton Mortgage in Ridgefield, Conn. The monthly payment would jump from $1,718 in the final month of the fifth year to $2,580 after the loan was reset, a difference of more than 50 percent.

Borrowers who expect to cover the larger debt by refinancing could be in trouble if rates have increased. Thirty-year fixed-mortgage rates are near their lowest level in a generation.

Nationwide, the increase in monthly payments as more mortgage rates start to float will cost families about an extra $40 billion over the next two years, according to estimates by Credit Suisse First Boston. That is the rough equivalent of a 40-cent increase in gas prices over the same span, which would pinch incomes but would not be likely to create a recession.

The biggest concern, many economists say, is that the new mortgages have come onto the market at a time when low interest rates and rapidly rising home prices are the only reality many people can imagine. Families might be making decisions assuming that combination will last forever.

In a speech to bankers in New York, Donald L. Kohn, a Federal Reserve governor, said yesterday that he expected a strong economy over the next few years.

"My message this morning, however, is that this is not a time for complacency," he said.

There is "significant uncertainty," he added, because some recent financial innovations "have not yet been rigorously stress-tested."