Current ARM mortgage rates report for May 21, 2025

Average ARM mortgage rates

Note that Fortune reviewed the most recent Zillow data available as of May 20.

Fixed-rate vs. adjustable-rate mortgages

Fixed-rate home loans account for about 92% of all mortgages in U.S. households. Unlike ARMs—where interest rates can increase or decrease after an initial fixed period—a fixed-rate mortgage guarantees the same rate for the entire loan term. This consistency gives them an obvious appeal.

However, there are situations where ARMs might be worth considering. Roughly 8% of borrowers choose these loans because they see unique advantages.

When you might consider an adjustable-rate mortgage

Three types of buyers often find ARMs beneficial:

• Starter home buyers: If you plan to move within a few years, an ARM may let you capitalize on a low initial rate without having to worry about future adjustments, as you intend to sell the home before the fixed period ends.
• Investors: Real estate investors who intend to flip a house or rent it out may use ARMs to minimize upfront costs, then sell the property or adjust the rent amount when rates change.
• Buyers facing high-interest markets: During periods of elevated interest rates, ARMs might offer lower upfront costs and may even provide relief later if market conditions improve.

Pro tip
Saving up for a down payment? Make sure you have a high-yield savings account.

How adjustable-rate mortgages work

ARMs typically feature a low fixed interest rate for a predetermined period—such as three, five, seven, or 10 years—followed by periods of adjustment. Factors affecting ARM rates during the adjustments include:

• Benchmark indices: ARM rates are often tied to benchmarks like the SOFR. The U.S. Treasury publishes an updated SOFR each day, reflecting the overnight costs faced by banks for borrowing cash. 
• Margins: Lenders add margins (fixed percentages) to benchmarks when calculating your ARM’s final rate. These can often range from 2% to 3.5%.
• Caps: Rate caps limit increases during specific intervals or throughout the loan term (e.g., initial adjustment caps, subsequent caps).

In most instances ARMs will be 30-year loans. Popular ARM structures include 5/1 and 10/6—meaning a fixed rate for five years and then annual adjustments, and a fixed rate for 10 years and adjustment periods every six months, respectively. There are also 3/1 ARMs, 7/1 ARMs and 10/1 ARMs. 

Learn more: Why the Secured Overnight Financing Rate might matter for your mortgage.

Refinancing from an ARM to a fixed-rate mortgage

If your plans change, you can likely decide to refinance into a fixed-rate mortgage. For instance, say you decide to stay in your home longer than you initially thought you would.

You’re not alone if that’s the situation you find yourself in, as many Millennial and Gen Z homeowners can’t afford to upgrade and are getting by with their starter homes.

Much like refinancing from one fixed-rate loan to another (which is often done to obtain a better rate or to tap equity) refinancing from an ARM to a fixed-rate loan involves shopping around with lenders, providing documentation to show you meet their requirements, and paying off your existing mortgage.

Pros and cons of adjustable-rate mortgages

ARMs come with positives and negatives you should weigh before applying for this type of mortgage. And, working with a trusted loan officer can help you determine if this is really the right loan type for you. Here are some basics to consider. 

Pros

• Chance for a lower rate at first. During the fixed introductory period, you may find an ARM offers you a lower rate than you could get on a fixed-rate mortgage.
• Potential for easier qualification. Some borrowers may find they’re more likely to qualify for an adjustable-rate mortgage than for a fixed-rate loan. 
• Possible savings down the road. This is not guaranteed, but if market rates decrease during adjustment periods, your monthly payment might go down accordingly.

Cons

• Possibility for payments to rise. Remember, adjustment periods are dependent on what’s happening with the market. Just like there’s a chance for your rate and thus your monthly payment to go down, the converse could happen.
• Hard to comparison shop. Complex terms can make comparison shopping for a good rate on an ARM more difficult than with common fixed-rate mortgage types. 
• Less predictability. Once you take out a fixed-rate mortgage, you’re locked into that rate as long as you have the loan. This can give you a little more stability in terms of monthly payment (though you may still face changes to things like homeowners insurance or your HOA dues). With ARMs, you need a certain level of risk tolerance.