Zillow Reports 5-Year ARM Rate at 7.26 7-Year at 7.82 in August 2025

On August 18, 2025, Zillow released its latest report on average adjustable-rate mortgage (ARM) rates, showing a current 5-year ARM rate of 7.26% and a 7-year ARM rate of 7.82%. These figures reflect the latest data available through Zillow's real estate marketplace and indicate a relatively stable but elevated ARM market [1]. The data comes just a few days after Fortune reviewed the most recent Zillow data on August 15, 2025 [1].

ARMs remain a less common choice for homebuyers, with fixed-rate mortgages dominating the market, held by approximately 92% of households. However, for the remaining 8%, ARMs continue to offer strategic value in certain circumstances [1]. These include buyers of temporary or starter homes, real estate investors, and buyers operating in a high-interest-rate environment where an ARM's initial lower rate may provide financial flexibility.

ARMs operate on a dual-phase structure: a fixed-rate period followed by an adjustment period. During the fixed period, the interest rate remains stable, while the adjustment period allows for rate changes based on benchmark indices like SOFR, lender-mandated margins, and rate caps that limit how much the rate can rise. For example, a 5/1 ARM locks the rate for the first five years and then adjusts annually for the remainder of the 30-year term [1].

The decision to refinance from an ARM to a fixed-rate mortgage is increasingly common, particularly among younger demographics like Millennials and Gen Z, who find themselves extending stays in starter homes due to affordability challenges. Refinancing is a viable option and follows a similar process to standard mortgage refinancing, involving rate shopping, documentation, and loan closing [1].

While ARMs offer potential benefits such as lower initial interest rates, reduced borrower requirements, and the possibility of decreasing monthly payments in a falling-rate environment, they also carry risks. These include the potential for sharply increasing payments once the adjustment period begins, making it harder to compare ARM offers due to their complex structure, and the overall lack of long-term payment predictability that fixed-rate mortgages provide [1].

The continued relevance of ARMs, despite their risks, highlights the importance of understanding their mechanics and market dynamics. As interest rate environments evolve, so too will the strategic value of different mortgage structures.

Source: [1] Current ARM mortgage rates report for Aug. 18, 2025 (https://fortune.com/article/current-arm-mortgage-rates-08-18-2025/)