5-Year ARM Rate Hits 7.35% as High-Rate Trend Continues

As of August 13, 2025, the average rate on 5-year adjustable-rate mortgages (ARMs) stands at 7.35%, according to data from Zillow, a major real estate marketplace in the United States [1]. The rate for 7-year ARMs is slightly higher at 7.82%. These figures reflect the latest trends in the mortgage market, as reported by Fortune, which reviewed Zillow’s data as of August 12, 2025 [1]. The data shows that while fixed-rate mortgages remain the dominant choice for U.S. homeowners—accounting for about 92% of the market—adjustable-rate mortgages still attract roughly 8% of borrowers due to their unique advantages [1].

ARMs typically offer a lower initial interest rate for a set period—such as three, five, seven, or 10 years—before transitioning to an adjustable phase. During the fixed period, borrowers benefit from predictable payments, but once adjustments begin, the rates are influenced by benchmark indices like the Secured Overnight Financing Rate (SOFR) and lender-mandated margins [1]. These adjustments can lead to either higher or lower interest rates depending on market conditions, making ARMs a more complex option than fixed-rate loans.

Despite the risks associated with rate fluctuations, certain types of homebuyers find ARMs to be a strategic choice. For example, first-time or starter home buyers who plan to move within a few years may benefit from the lower introductory rate without being affected by future adjustments. Similarly, real estate investors who intend to flip or rent properties often use ARMs to minimize initial costs [1]. Additionally, in a high-interest-rate environment, ARMs can provide a more affordable entry point into the housing market, especially if market conditions improve in the future [1].

Adjustable-rate mortgages typically follow structures like 5/1, 10/6, or 7/1, where the first number indicates the initial fixed-rate period and the second number represents the frequency of adjustments [1]. Borrowers also have the option to refinance from an ARM to a fixed-rate mortgage if their circumstances change. This flexibility allows homeowners to lock in a stable rate if they decide to stay in their homes longer than anticipated [1].

While ARMs come with potential benefits such as lower initial rates and possible savings if market rates decline, they also carry notable drawbacks. These include the risk of rising payments during adjustment periods, the difficulty of comparing loan terms due to their complexity, and the lack of long-term predictability that fixed-rate mortgages offer [1]. Therefore, prospective borrowers must carefully assess their financial stability and risk tolerance before committing to an ARM.

The latest ARM rate data reinforces the ongoing trend of high interest rates in the housing market, which continues to influence borrower behavior and financing decisions. As such, understanding the nuances of adjustable-rate mortgages is essential for those considering these options in the current economic climate [1].

Source: [1]Current ARM mortgage rates report for Aug. 13, 2025 (https://fortune.com/article/current-arm-mortgage-rates-08-13-2025/)