Archives for July 2025

Considering a mortgage in today's market? You're likely seeing some interesting shifts. As of July 2, 2025, the national average for a 5-year Adjustable Rate Mortgage (ARM) has climbed to 7.73%. This is a significant increase and something potential homebuyers – and even current homeowners considering refinancing – need to understand fully.

Let's dive deep into what's driving this increase, how it compares to other mortgage options, and what you should consider before making a decision.

Today’s 5-Year Adjustable Rate Mortgage Soars to 7.73% – July 3, 2025

Let’s start with a snapshot of where different mortgage rates stand as of yesterday, July 3, 2025. This gives us a baseline to understand the relative position of the 5-year ARM.

Loan Type	Rate	Weekly Change	APR	Weekly Change
Conforming Loans
30-Year Fixed Rate	6.79%	Up 0.01%	7.27%	Up 0.03%
20-Year Fixed Rate	6.08%	Down 0.18%	6.56%	Down 0.07%
15-Year Fixed Rate	5.84%	Up 0.03%	6.16%	Up 0.05%
10-Year Fixed Rate	5.58%	Down 0.12%	5.77%	Down 0.23%
7-Year ARM	7.50%	Up 0.36%	7.75%	Down 0.07%
5-Year ARM	7.73%	Up 0.26%	8.09%	Up 0.16%
3-Year ARM	—	0.00%	—	0.00%
Government Loans
30-Year Fixed Rate FHA	6.87%	Down 0.37%	7.90%	Down 0.38%
30-Year Fixed Rate VA	6.30%	Up 0.03%	6.50%	Up 0.02%
15-Year Fixed Rate FHA	5.44%	Down 0.83%	6.41%	Down 0.83%
15-Year Fixed Rate VA	5.79%	Up 0.01%	6.10%	Down 0.01%
Jumbo Loans
30-Year Fixed Rate Jumbo	7.34%	Up 0.19%	7.73%	Up 0.17%
15-Year Fixed Rate Jumbo	6.60%	Up 0.05%	6.84%	Up 0.04%
7-Year ARM Jumbo	7.42%	0.00%	8.00%	0.00%
5-Year ARM Jumbo	7.42%	Down 0.05%	7.92%	Down 0.02%
3-Year ARM Jumbo	—	0.00%	—	0.00%

Source: Zillow

Key Takeaways from this table:

• ARM rates are generally higher than fixed rates: Notice that the 5-year ARM at 7.73% has a higher interest rate than both the 30-year and 15-year fixed-rate mortgages.
• Rate Volatility: Some rates went up, while others went down. This highlights the dynamic nature of the mortgage market and the importance of staying informed.
• Jumbo Loans: While this article primarily focuses on conforming loans, it's worth noting the Jumbo Loan rates. Jumbo loans, which exceed conforming loan limits, often have different rate trends.

Why Are 5-Year ARM Rates So High Right Now?

This is the million-dollar question! Normally, you'd expect shorter-term loans to have lower interest rates than longer-term ones. After all, lenders are taking on more risk when they commit to a fixed rate for 30 years versus just 5. So, why is the 5-year ARM so high?

The main reason is something called an inverted yield curve.

• The Yield Curve: In simple terms, the yield curve is a graph that plots the interest rates (or “yields”) of different U.S. Treasury bonds, from short-term (like 3-month) to long-term (like 30-year).
• Normal Yield Curve: Usually, the yield curve slopes upward. This means longer-term bonds have higher yields than shorter-term ones. This makes sense because investors demand a higher return for locking up their money for a longer period.
• Inverted Yield Curve: An inverted yield curve happens when short-term rates rise above long-term rates. This is unusual and often signals that investors are worried about the near-term economic outlook. They believe that in the future, the central bank will need to cut interest rates to stimulate the economy.

Why does this inversion affect ARM rates?

• ARMs are typically tied to short-term interest rate indices, like the Secured Overnight Financing Rate (SOFR) or the Constant Maturity Treasury (CMT) index.
• Fixed-rate mortgages, on the other hand, are more closely linked to long-term bond yields (specifically the 10-year Treasury yield).

Because of the inverted yield curve, those short-term indices that ARMs are based on are currently higher than the long-term yields that influence fixed-rate mortgages.

Other Factors Influencing Rates:

The inverted yield curve is the primary driver, but other economic factors contribute to the elevated 5-year ARM rate:

• Federal Reserve Policy: The Federal Reserve's monetary policy has a significant impact on interest rates. If the Fed is holding steady on interest rates or hinting at future hikes, it can put upward pressure on short-term rates.
• Inflation Concerns: Lingering concerns about inflation also play a role. If investors believe inflation will remain elevated, they'll demand higher yields on bonds to compensate for the erosion of their investment's purchasing power over time.
• Government Debt: The level of government debt can also influence interest rates. Higher government borrowing can lead to increased supply in the bond market, potentially pushing yields higher.
• Economic Data: Strong economic data can sometimes increase rates, as it suggests the Fed may be less likely to cut rates in the near future.

Is a 5-Year ARM Right for You? Weighing the Pros and Cons

Given the current rate environment, is a 5-year ARM a good choice? It depends a lot on your individual circumstances and risk tolerance. Here's a breakdown to consider:

Potential Advantages (in the right circumstances):

• Lower Initial Rate (Potentially…): I know, I've been saying the 5-year ARM rate is high. But if the yield curve corrects itself and rates come down over the next few years, you could benefit from a lower initial rate compared to a 30-year fixed.
• Short-Term Homeownership: If you only plan to stay in the home for a few years (less than 5), a 5-year ARM could make sense. You'd get the initial rate and potentially sell before the rate adjusts upward.
• Anticipating Rate Decreases: If you firmly believe that interest rates will fall significantly in the next few years, an ARM could allow you to take advantage of those lower rates when the loan adjusts.

Potential Disadvantages (Especially in the current market):

• Rate Risk: This is the biggest concern right now. If rates rise during the adjustment period, your monthly payments could increase significantly.
• Unpredictability: It's hard to predict exactly where interest rates will be in 5 years. Economic conditions can change rapidly.
• Higher Initial Rate right now : In 2025, 5-year ARMs are trading higher than a 30 year fixed rate.

Important Considerations Before Choosing an ARM:

• Your Financial Situation: Can you comfortably afford higher monthly payments if the interest rate on your ARM adjusts upward?
• Your Risk Tolerance: Are you comfortable with the uncertainty of fluctuating interest rates?
• The Loan Terms: Understand the specifics of the ARM, including the adjustment frequency (how often the rate can change), the rate caps (the maximum the rate can increase), and the margin (the amount added to the index to determine your interest rate).

Fixed-Rate Mortgage Alternatives: Weighing Your Options

With the uncertainty in the ARM market, many borrowers are opting for the stability of a fixed-rate mortgage. Here's a quick overview:

• 30-Year Fixed-Rate Mortgage: This is the most popular choice for a reason. It offers payment predictability over the life of the loan. However, you'll typically pay more interest over the long term compared to a shorter-term loan.
• 15-Year Fixed-Rate Mortgage: You'll pay off the loan much faster and save a considerable amount of interest. However, your monthly payments will be higher.
• 20-Year Fxd-Rate Mortgage: A sweet spot between 15 and 30 year loans.

Other Strategies for Navigating the Mortgage Market

• Rate Shopping: Get quotes from multiple lenders. Mortgage rates can vary significantly from one lender to another.
• Improve Your Credit Score: A higher credit score can qualify you for a lower interest rate.
• Increase Your Down Payment: A larger down payment reduces the amount you need to borrow and can also help you qualify for a better rate.
• Consider Government-Backed Loans: FHA and VA loans often have more lenient requirements and lower interest rates than conventional loans.

My Personal Take: Proceed with Caution on ARMs Right Now

Given the current economic uncertainties and the inverted yield curve, I personally believe that most borrowers should exercise caution when considering a 5-year ARM. The risk of rising rates outweighs the potential benefits for many people. The peace of mind that comes with a fixed-rate mortgage is often worth the slightly higher initial rate.

Of course, everyone's situation is different. If you have a strong understanding of the risks and feel comfortable with the potential for rate increases, a 5-year ARM might be a viable option. It's essential to do your research, talk to a qualified mortgage professional, and carefully consider your own financial situation before making a decision.

If you're in the market for a home, you're probably keeping a close eye on mortgage rates. According to Zillow, as of today, July 2, 2025, the national average for a 30-year fixed mortgage is 6.76%, up slightly from yesterday. But the real story is in the 5-year ARM, which has increased 4 basis points to 7.60%. Let's find out what these changes mean for you, why rates are where they are, and what you can expect in the coming months.

Today's 5-Year Adjustable Rate Mortgage Jumps by 4 Basis Points – July 2, 2025

Here's a snapshot of where mortgage rates stand today, compared to last week, according to Zillow:

Conforming Loans

PROGRAM	RATE	1W CHANGE	APR	1W CHANGE
30-Year Fixed Rate	6.76%	down 0.02%	7.21%	down 0.03%
20-Year Fixed Rate	6.48%	up 0.23%	6.82%	up 0.19%
15-Year Fixed Rate	5.80%	down 0.01%	6.09%	down 0.02%
10-Year Fixed Rate	5.62%	down 0.08%	5.77%	down 0.23%
7-year ARM	7.56%	up 0.42%	7.90%	up 0.08%
5-year ARM	7.60%	up 0.13%	7.98%	up 0.05%
3-year ARM	—	0.00%	—	0.00%

Government Loans

PROGRAM	RATE	1W CHANGE	APR	1W CHANGE
30-Year Fixed Rate FHA	6.88%	down 0.37%	7.90%	down 0.38%
30-Year Fixed Rate VA	6.26%	down 0.01%	6.45%	down 0.03%
15-Year Fixed Rate FHA	5.34%	down 0.93%	6.30%	down 0.94%
15-Year Fixed Rate VA	5.77%	down 0.01%	6.10%	down 0.01%

Jumbo Loans

PROGRAM	RATE	1W CHANGE	APR	1W CHANGE
30-Year Fixed Rate Jumbo	7.08%	down 0.07%	7.50%	down 0.06%
15-Year Fixed Rate Jumbo	6.50%	down 0.04%	6.79%	down 0.02%
7-year ARM Jumbo	7.42%	0.00%	8.00%	0.00%
5-year ARM Jumbo	7.55%	up 0.08%	8.03%	up 0.09%
3-year ARM Jumbo	—	0.00%	—	0.00%

Why the Focus on the 5-Year ARM?

You might be wondering why I'm highlighting the 5-year ARM. While the 30-year fixed rate is the most popular choice, the 5-year ARM can be a smart option for some borrowers. Here's the deal:

• What is an ARM? An Adjustable-Rate Mortgage (ARM) has an interest rate that's fixed for a certain period (in this case, five years) and then adjusts periodically based on market conditions.
• Who Benefits? ARMs can be attractive if you plan to move or refinance before the fixed-rate period ends. They often start with lower interest rates than fixed-rate mortgages, which can save you money in the short term.
• The Risk: The big risk with an ARM is that your interest rate could increase after the fixed period, making your monthly payments higher. That's why it's crucial to understand how the rate adjusts and what the maximum possible rate could be.

Why Are Mortgage Rates Relatively High in 2025? The Big Picture

It's no secret that mortgage rates aren't as low as they were a few years ago. Here's a breakdown of the key factors driving today's rates:

• Inflation Concerns: While inflation has cooled down from its peak, it's still hovering above the Federal Reserve's target of 2%. This puts upward pressure on interest rates.
• Federal Reserve Policy: The Fed doesn't directly control mortgage rates, but its actions have a big impact. The Fed has been holding steady with its benchmark interest rate to fight inflation. Furthermore, they are shrinking their balance sheet which also increases rates.
• Economic Uncertainty: The global economy is facing a lot of uncertainty, from geopolitical tensions to concerns about economic growth. This uncertainty can lead investors to buy safer assets like US Treasury bonds, which mortgage rates tend to follow.
• Rising Federal Debt: The increasing national debt is also a factor, as it can put upward pressure on interest rates.
• Housing Supply and Demand: While inventory varies by market, in many areas, demand still outstrips supply, keeping prices relatively high. This allows lenders to maintain higher rates.

What Does This Mean for You?

So, how do these factors translate into your home-buying or refinancing decisions?

• For Buyers: The current rate environment means you'll likely pay more in interest over the life of your loan. It's more important than ever to shop around for the best rates and consider different loan options. Don't just focus on the monthly payment; look at the total cost of the loan.
• For Refinancers: If you're hoping to refinance to a lower rate, you might need to be patient. Keep an eye on market trends and consider talking to a mortgage professional to see if refinancing makes sense for you.

Looking Ahead: What's in Store for Mortgage Rates?

Predicting the future of mortgage rates is never easy, but here's what experts are saying for the rest of 2025:

• Fannie Mae Forecast: Fannie Mae predicts that the 30-year fixed-rate mortgage could reach 6.5% by the end of 2025.
• General Consensus: Most experts anticipate a gradual decline in mortgage rates, fueled by a slowing economy and potential interest rate cuts from the Federal Reserve. The general expectation is that rates will be in the mid-to-upper 6% range.

However, it's important to remember that these are just forecasts. Unexpected events could easily change the trajectory of rates.

Stay Informed and Be Prepared

Here's my personal advice based on years of experience:

1. Know Your Credit Score: Your credit score is a major factor in determining your mortgage rate. Check your credit report regularly and take steps to improve your score if needed.
2. Shop Around: Don't settle for the first rate you're offered. Get quotes from multiple lenders to see who can give you the best deal.
3. Consider All Loan Options: Think beyond the 30-year fixed rate. An ARM or a 15-year fixed rate might be a better fit for your financial situation.
4. Factor in All Costs: Remember that the interest rate is just one part of the equation. Consider other costs like closing costs, property taxes, and insurance.
5. Talk to a Professional: A good mortgage broker or lender can help you understand your options and guide you through the process.

Key Takeaway: While the slight increase in the 5-year ARM is worth noting, the broader mortgage market remains dynamic. Stay informed, understand your financial situation, and seek expert advice to make the best decision for your needs.

Navigating the mortgage market can be tricky. But with the right information and a little preparation, you can find a mortgage that works for you. Good luck!

Feeling confused about the mortgage market? Totally normal! As of July 1, 2025, the 5-year adjustable-rate mortgage (ARM) crept up to 7.61% – a tiny 3-basis-point bump from last week’s 7.58%. Think of it like a slow-rolling hill on a rollercoaster ride. Let’s unpack what this rate wiggle means for buyers, refiners, and the housing market’s vibe. Buying or refinancing is no small move, and these little shifts matter. Your wallet and dream home journey just got a new plot twist – let’s decode it together.

Today's Mortgage Rates: 5-Year ARM Increases by 3 Basis Points to 7.61%

What’s Causing This Rise in 5-Year ARM Rates?

Understanding why 5-Year ARM rates are increasing requires a look at the broader economic environment. Here are factors that could be at play:

• Inflation Expectations: If investors anticipate higher inflation, they will demand higher returns on their investments, including mortgages.
• Federal Reserve Policy: The Federal Reserve (also known as the Fed), by raising or lowering interest rates, has a big impact on mortgage rates. If the Fed believes inflation has not come down enough, they can increase these rates.
• Economic Growth: A strong economy can lead to increased demand for credit, which in turn can push interest rates higher.
• Bond Market Dynamics: Mortgage rates are closely tied to the yield on 10-year Treasury bonds. When Treasury yields rise, mortgage rates tend to follow.
• Market Sentiment: Investor confidence and risk appetite can also influence mortgage rates. Times of uncertainty can cause rates to fluctuate.

Breaking Down the Numbers: A Closer Look at July 1, 2025 Mortgage Rates

Let's take a deeper dive into the numbers reported by Zillow on July 1, 2025. To properly understand what is happening with the 5-Year ARM, it helps to view it in the context of other common mortgage products.

Conforming Loans (Loans that meet specific criteria and can be sold to Fannie Mae or Freddie Mac):

PROGRAM	RATE	1W CHANGE	APR	1W CHANGE
30-Year Fixed Rate	6.73 %	down 0.06%	7.17%	down 0.07%
20-Year Fixed Rate	6.01 %	down 0.25%	6.36%	down 0.27%
15-Year Fixed Rate	5.72 %	down 0.09%	6.01%	down 0.10%
10-Year Fixed Rate	5.62 %	down 0.07%	5.77%	down 0.23%
7-year ARM	7.00 %	down 0.14%	7.91%	up 0.09%
5-year ARM	7.61 %	up 0.15%	7.98%	up 0.05%
3-year ARM	—	0.00 %	—	0.00 %

Government Loans (FHA and VA loans, which are insured by the government):

PROGRAM	RATE	1W CHANGE	APR	1W CHANGE
30-Year Fixed Rate FHA	6.44 %	down 0.81%	7.46%	down 0.82%
30-Year Fixed Rate VA	6.24 %	down 0.04%	6.43%	down 0.05%
15-Year Fixed Rate FHA	5.19 %	down 1.08%	6.15%	down 1.09%
15-Year Fixed Rate VA	5.77 %	down 0.01%	6.09%	down 0.02%

Jumbo Loans (mortgages that exceed conforming loan limits):

PROGRAM	RATE	1W CHANGE	APR	1W CHANGE
30-Year Fixed Rate Jumbo	7.20 %	up 0.05%	7.55%	down 0.01%
15-Year Fixed Rate Jumbo	6.57 %	up 0.02%	6.74%	down 0.07%
7-year ARM Jumbo	7.42 %	0.00 %	8.00%	0.00 %
5-year ARM Jumbo	7.53 %	up 0.05%	7.94%	0.00 %
3-year ARM Jumbo	—	0.00 %	—	0.00 %

Data is current as of July 1, 2025

• Fixed-Rate Mortgages Generally Lower: Most fixed-rate options have decreased in the past week, indicating a potential cooling in fixed rate demand.
• ARM Volatility: Adjustable-rate mortgages show mixed movements. The 5-year ARM is notably up, while the 7-year ARM is down. This variance highlights the unpredictable nature of these products.

How Does This Affect You?

Okay, numbers are great, but what does this actually mean for you? Here’s a breakdown:

• For Homebuyers: If you're considering a 5-Year ARM, this increase means you'll be paying more interest over the initial fixed-rate period. You’ll want to carefully consider if you can comfortably afford potential rate adjustments after those first five years.
• For Those Refinancing: If you have an existing mortgage, now might not be the ideal time to refinance into a 5-Year ARM, especially if your goal is to lower your interest rate for the long term. It’s always wise to assess and see if a fixed rate is a smarter move for you.
• For Current 5-Year ARM Holders: If you already have a 5-Year ARM, pay attention to when your rate will adjust. Start preparing for potential higher payments. It might be wise to explore refinancing options to lock in a fixed rate if you're concerned about future increases.

Think of it like driving a car. A fixed rate is like cruise control; you know exactly what's going to happen. An ARM is more like driving manually; you have to constantly adjust to the road and changing conditions.

5-Year ARM vs. Other Mortgage Options: Which Is Right for You?

Choosing the right mortgage is a deeply personal decision. Here's a comparison to help you weigh your options:

• 5-Year ARM: Great Option if you are planning to move within 5 years or expect a significant increase in income that will offset eventual rate adjustments.
  • Pros: Lower initial interest rate than fixed-rate mortgages, potentially saving money in the short term.
  • Cons: Interest rate can increase after the initial fixed-rate period, leading to higher monthly payments.
• 30-Year Fixed-Rate Mortgage: Ideal if you prioritize stability and long-term predictability.
  • Pros: Predictable monthly payments for the life of the loan, protecting you from rising interest rates.
  • Cons: Higher initial interest rate compared to ARMs, resulting in higher overall interest paid over the long term.
• 15-Year Fixed-Rate Mortgage: Good if you want to pay off your home quickly and save on interest.
  • Pros: Significantly lower interest rates than 30-year mortgages, allowing you to build equity faster.
  • Cons: Higher monthly payments than 30-year mortgages, requiring a larger monthly budget.

  Factors to Consider When Choosing a Mortgage:

• Your Financial Situation: Assess your income, debts, and credit score.
• Your Risk Tolerance: How comfortable are you with the possibility of rising interest rates?
• Your Long-Term Plans: How long do you plan to stay in the home?
• Your Investment Goals: Are you focused on building equity quickly or minimizing monthly payments?

The Fixed-Rate vs. ARM Dilemma: My Personal Thoughts

As someone who has navigated the mortgage market myself, I can tell you that there's no one-size-fits-all answer. If you decide to take on more risk and seek the lower initial costs of an ARM, you need a crystal ball (kidding!). However, what you DO need is enough financial wiggle room that you can breathe easy if things go badly.

Tips for Navigating Today's Mortgage Market

• Shop Around: Don't settle for the first offer you receive. Compare rates and terms from multiple lenders to ensure you're getting the best deal. Even a small difference in interest rates can save you thousands of dollars over the life of the loan.
• Get Pre-Approved: Getting pre-approved for a mortgage gives you a clear understanding of how much you can borrow and strengthens your offer when buying a home.
• Consider Your Credit Score: Your credit score is a huge factor in determining your interest rate. Work to improve your credit score before applying for a mortgage to secure better terms.
• Factor in All Costs: Don't just focus on the interest rate. Consider all the associated costs, such as origination fees, appraisal fees, and closing costs.
• Talk to a Professional: Seek guidance from a qualified mortgage broker or financial advisor. They can help you navigate the complexities of the mortgage market and make informed decisions.

The Bottom Line: Stay Informed and Prepared

The slight increase in the 5-Year ARM rate on July 1, 2025 underscores the dynamic nature of the mortgage market. Whether you're a first-time homebuyer, looking to refinance, or already have an ARM, staying informed about market trends and understanding your options is crucial for making sound financial decisions. Don't be afraid to ask questions, do your homework, and seek professional advice.