Zillow Reports 5-Year and 7-Year ARM Rates at 7.12 and 7.08 Percent Amid High Interest Environment

On August 6, 2025, Zillow reported that the average rate for a 5-year adjustable-rate mortgage (ARM) stood at 7.12% [1]. The 7-year ARM rate was also slightly lower at 7.08%. These figures reflect the ongoing market dynamics where borrowers continue to weigh the benefits of ARMs against the stability of fixed-rate mortgages, especially as interest rates remain elevated. The data was reviewed by Fortune as of August 5, 2025 [1].

ARMs remain a less popular option in the U.S., with fixed-rate mortgages accounting for approximately 92% of all home loans. The remaining 8% of borrowers opt for ARMs, often due to their initial cost advantages or specific borrowing scenarios [1]. Starter home buyers, real estate investors, and those navigating high-interest markets are among the groups that frequently consider ARMs. For instance, investors may use these loans to reduce upfront costs and later adjust rental prices in response to rate fluctuations [1].

Adjustable-rate mortgages typically offer a fixed rate for a set period—such as 3, 5, 7, or 10 years—before transitioning to an adjustable phase. The rate is generally influenced by benchmark indices like the Secured Overnight Financing Rate (SOFR), with lenders adding a fixed margin to the index. Rate caps are also built into these loans to limit the extent of rate increases during adjustment periods [1].

Popular ARM structures include 5/1, 10/6, 3/1, 7/1, and 10/1, where the first number represents the fixed period in years, and the second indicates the adjustment frequency. While ARMs may provide short-term benefits, refinancing to a fixed-rate mortgage is an option for borrowers whose plans change. This is particularly relevant in a market where many younger homeowners remain in starter homes for longer periods [1].

Despite potential advantages such as lower initial rates and easier qualification, ARMs carry risks, including rising payments due to market fluctuations. Borrowers must carefully assess these trade-offs, often with the guidance of a loan officer, to determine whether an ARM aligns with their financial goals [1].

Source: [1] Current ARM mortgage rates report for Aug. 6, 2025 (https://fortune.com/article/current-arm-mortgage-rates-08-06-2025/)