5-Year ARM Rates Hit 7.67% 7-Year at 7.56% as Fixed-Rate Mortgages Dominate 92% of U.S. Lending

The average rate for 5-year adjustable-rate mortgages (ARMs) reached 7.67% on July 30, 2025, according to Zillow data analyzed by Fortune [1]. Similarly, the 7-year ARM rate stood at 7.56%, reflecting a market environment where fixed-rate mortgages dominate 92% of U.S. household lending activity [1]. Despite their lower popularity, ARMs remain a strategic option for specific borrower categories, including starter home buyers, investors, and those navigating high-interest rate environments [1].

ARMs operate through an initial fixed-rate period—commonly 3, 5, 7, or 10 years—followed by periodic adjustments tied to benchmarks such as the Secured Overnight Financing Rate (SOFR) and lender-specified margins [1]. For instance, a 5/1 ARM locks the rate for five years before annual adjustments, while a 10/6 ARM adjusts every six months after a decade of fixed rates [1]. Lenders often add margins between 2% and 3.5% to benchmark rates to determine final ARM terms, with caps designed to limit rate volatility during adjustment periods [1].

Borrowers may opt for ARMs to capitalize on lower initial rates, particularly in high-interest markets. Starter home buyers can benefit if they plan to sell before rate adjustments occur, while investors may use ARMs to minimize upfront costs in properties intended for short-term ownership or rental [1]. Refinancing from an ARM to a fixed-rate mortgage is also an option, though it requires meeting lender criteria and typically involves closing costs [1].

However, ARMs carry risks, including unpredictable payment increases during adjustment periods. While market rate declines could lower payments, rising rates pose a significant financial challenge for borrowers unprepared for volatility [1]. The complexity of ARM terms—such as varying adjustment intervals and caps—can complicate comparison shopping, making them less intuitive than fixed-rate loans [1].

Fortune’s analysis highlights that Zillow data for July 29-30, 2025, indicates sustained elevated rates across mortgage products, with fixed-rate mortgages remaining the default choice for most homeowners. Nonetheless, ARMs continue to attract niche demand, particularly among borrowers prioritizing short-term affordability over long-term stability [1].

Source: [1] Current ARM Mortgage Rates Report for July 30, 2025, [https://fortune.com/article/current-arm-mortgage-rates-07-30-2025/](https://fortune.com/article/current-arm-mortgage-rates-07-30-2025/)