5-Year ARMs Hit 7.67% 7-Year ARMs at 7.68%

On July 9, 2025, the average rate for 5-year adjustable-rate mortgages (ARMs) stood at 7.67%, while the 7-year ARM rate was slightly higher at 7.68%. These rates reflect the current market conditions and are based on data from a popular real estate marketplace.

Fixed-rate mortgages remain the dominant choice among homeowners, accounting for approximately 92% of all mortgages in U.S. households. These loans offer the stability of a consistent interest rate throughout the loan term, which appeals to many borrowers seeking predictability. However, ARMs, which make up about 8% of the market, can be advantageous in certain situations.

Three types of buyers often find ARMs beneficial. Starter home buyers who plan to move within a few years can capitalize on the low initial rate without worrying about future adjustments. Real estate investors who intend to flip a house or rent it out may use ARMs to minimize upfront costs and adjust their strategies as rates change. Additionally, buyers facing high-interest markets might find ARMs offer lower upfront costs and potential relief if market conditions improve.

ARMs typically feature a low fixed interest rate for a predetermined period, such as three, five, seven, or ten years, followed by periods of adjustment. Factors affecting ARM rates during these adjustments include benchmark indices like the Secured Overnight Financing Rate (SOFR), margins added by lenders, and rate caps that limit increases. Popular ARM structures include 5/1 and 10/6, meaning a fixed rate for five years with annual adjustments and a fixed rate for ten years with adjustments every six months, respectively.

If a borrower's plans change, they can refinance from an ARM to a fixed-rate mortgage. This process involves shopping around with lenders, providing necessary documentation, and paying off the existing mortgage. Many Millennial and Gen Z homeowners are opting to stay in their starter homes longer than initially planned, making refinancing a viable option.

ARMs come with both advantages and disadvantages. During the fixed introductory period, ARMs may offer a lower rate than fixed-rate mortgages, potentially making them easier to qualify for and offering possible savings if market rates decrease. However, there is also the risk of payments rising during adjustment periods, making comparison shopping more complex and introducing less predictability in monthly payments.