5-Year ARMs Rise to 7.56% 7-Year ARMs at 7.48%

The current average rate on 5-year adjustable-rate mortgages (ARMs) stands at 7.56%, while the 7-year ARM rate is 7.48%. These rates are based on data from a popular real estate marketplace, reflecting the most recent information available as of July 2, 2025.

Fixed-rate mortgages are the dominant choice among U.S. households, accounting for approximately 92% of all home loans. These mortgages offer a consistent interest rate throughout their term, which contributes to their popularity. However, ARMs can be advantageous under specific circumstances, with around 8% of borrowers opting for them due to their unique benefits.

Three groups of homebuyers can commonly benefit from considering ARMs. First, homeowners who intend to move soon may enjoy a low introductory rate without worrying about future adjustments. Second, real estate investors, such as landlords or house flippers, may use ARMs to adjust monthly rent if interest rates increase or to sell the property before the adjustment period kicks in. Third, buyers in high-interest environments may find ARMs offer lower rates during the introductory period, with the potential for relief later if market conditions improve.

ARMs begin with an introductory fixed rate that typically lasts for three, five, seven, or 10 years before transitioning into adjustment periods. The rate changes during these periods can depend on various factors, including benchmarks like SOFR, margins added by lenders, and caps that limit how much rates can increase. Common ARM formats include 5/1, 10/6, 3/1, 7/1, and 10/1 structures.

If plans change and homeowners find themselves staying in their starter homes longer than expected, they may opt to refinance from an ARM to a fixed-rate mortgage. The refinancing process is similar to refinancing from one fixed-rate loan to another, involving shopping around with various lenders, providing necessary application documents, and using the new loan to pay off the old one in full.

When evaluating whether an ARM is the right choice, it is important to consider the pros and cons. ARMs may offer a lower initial rate compared to fixed-rate loans, potentially easier qualification standards for some borrowers, and the chance to save if market conditions improve and rates go down. However, payments could spike after adjustments begin, comparing offers is more complex than with common fixed-rate loans, and homeowners face more unpredictability than with a fixed-rate loan.