5-Year ARM Rate Rises to 7.12% Amid Economic Uncertainty

On August 8, 2025, the average rate on 5-year adjustable-rate mortgages (ARMs) stood at 7.12%, according to Zillow, a leading real estate marketplace [1]. This reflects ongoing pressure on mortgage rates amid economic uncertainties and shifting inflationary expectations. The 7-year ARM rate was reported at 7.08%, indicating a relatively tight range between these two commonly referenced ARM products [1].

ARMs continue to serve as a viable option for specific types of borrowers, particularly those with short-term housing plans, investors, and those entering the market during periods of high interest rates. Despite making up roughly 8% of all U.S. mortgages, ARMs offer the potential for lower initial rates compared to fixed-rate loans, particularly during introductory periods that typically last between three and 10 years [1].

The structure of ARMs is typically based on a benchmark index such as SOFR, with lenders adding a fixed margin to determine the final rate. Additionally, rate caps are included to limit how much the interest rate can increase during each adjustment period or over the loan’s lifetime. Common structures include the 5/1 ARM and the 10/6 ARM, with variations such as the 3/1 and 7/1 also available [1].

Fixed-rate mortgages, which account for about 92% of the U.S. market, remain the preferred option for most buyers due to their stability and predictability. However, refinancing from an ARM to a fixed-rate mortgage is a viable path for those who have changed their housing plans or find themselves unexpectedly staying in a property longer than originally intended [1].

Zillow’s data shows that the 5-year ARM rate is slightly above the 7% threshold, which may limit its appeal to some borrowers despite its potential short-term cost advantages. Nonetheless, for those who expect to move within a few years or are leveraging ARMs for investment purposes, these loans can remain an attractive alternative [1].

It is important to note that ARM rates can fluctuate significantly after the initial fixed period ends, which introduces uncertainty into future monthly payments. Borrowers are advised to carefully assess their financial situation and consider factors such as future relocation plans, creditworthiness, and debt-to-income ratios before committing to an ARM [1].

The ongoing economic environment, including potential policy changes and inflationary pressures, continues to influence the mortgage market. While rates remain elevated, market participants are monitoring for signs of stabilization and gradual easing. As such, borrowers are encouraged to remain proactive by maintaining strong credit profiles and shopping among multiple lenders to secure the most favorable terms [1].

Source:

[1] Current ARM mortgage rates report for Aug. 8, 2025 (Fortune) - https://fortune.com/article/current-arm-mortgage-rates-08-08-2025/