5-Year ARMs Rise to 7.91% 7-Year ARMs at 7.63%

On July 18, 2025, the average rate for 5-year adjustable-rate mortgages (ARMs) stood at 7.91%, while the 7-year ARM rate was 7.63%. These rates reflect the current market conditions and are based on data from a popular real estate marketplace.

Fixed-rate mortgages dominate the U.S. market, accounting for approximately 92% of all mortgages. These loans offer a stable interest rate throughout the loan term, providing predictability and reliability for borrowers. In contrast, ARMs offer an initial fixed-rate period followed by adjustable rates, which can be influenced by various factors including benchmark indices, lender margins, and rate caps.

ARMs may be advantageous for certain types of borrowers. Short-term homeowners who plan to relocate within a few years might benefit from the low introductory rates of ARMs. Property investors can also leverage ARMs for low initial rates, allowing them to flip the property before rate adjustments or increase rents during higher interest rate periods. Additionally, during high-interest periods, ARMs can offer lower rates initially and potential rate reductions if market conditions improve.

ARMs typically start with a fixed interest period lasting between three to 10 years, after which the rate adjusts based on benchmark indices such as SOFR, lender margins, and rate caps. Common ARM structures include the 5/1 ARM, 10/6 ARM, 3/1 ARM, 7/1 ARM, and 10/1 ARM. These structures provide flexibility but also come with the risk of rate increases.

Refinancing from an ARM to a fixed-rate mortgage can be a strategic move for homeowners whose circumstances have changed. For instance, if a homeowner initially intended to flip a property but decided to keep it as a primary residence, refinancing to a fixed-rate mortgage can provide long-term stability. The refinancing process involves shopping around with lenders, submitting necessary documents, and paying off the existing loan with the new one.

ARMs offer both advantages and disadvantages. On the positive side, they can provide a lower introductory rate compared to fixed-rate loans and the potential for reduced monthly payments if market rates decrease. However, monthly payments can increase significantly after the fixed period ends, and comparing offers can be more complex. Additionally, ARMs lack the predictability and stability of fixed-rate mortgages.