5-Year Adjustable Rate Mortgage Drops Today by 21 Basis Points – June 17, 2025

If you're following the mortgage market closely, you'll want to know this: On June 17, 2025, the national average 5-year Adjustable Rate Mortgage (ARM) rate experienced a notable decrease, dropping by 21 basis points to 7.18%. This shift presents both opportunities and considerations for prospective homebuyers and those looking to refinance. Is now a good time to take advantage of an ARM? Let's dig into what this means for you.

5-Year Adjustable Rate Mortgage Drops Today by 21 Basis Points – June 17, 2025

It's been a pretty wild ride for mortgage rates lately, hasn't it? Jumps, dips, and flatlines – keeping up is a job in itself! Today's report from Zillow offers a snapshot of where we stand, and while the 30-year fixed rate remains stubbornly stable at 6.93%, the movement we're seeing in ARM rates is definitely worth noting.

Here's a quick rundown of the key takeaways from today's data:

• 30-Year Fixed Rate: Still holding steady at 6.93%. Predictable, but not exactly thrilling.
• 15-Year Fixed Rate: A slight decrease of 2 basis points, landing at 5.99%.
• 5-Year ARM: The star of the show, with a 21 basis point drop to 7.18%.
• Other ARM rates are still high with a 7-year ARM seeing 7.63%.

To give you a clearer picture I have compiled the latest mortgage rates provided by Zillow

Here is a Summary of Conforming Loans:

PROGRAM	RATE	1W CHANGE	APR	1W CHANGE
30-Year Fixed Rate	6.93%	0.00%	7.37%	down0.01%
20-Year Fixed Rate	6.58%	up0.09%	6.91%	0.00%
15-Year Fixed Rate	5.99%	down0.02%	6.28%	down0.03%
10-Year Fixed Rate	5.87%	down0.13%	6.23%	down0.04%
7-year ARM	7.63%	up0.30%	8.09%	up0.17%
5-year ARM	7.18%	down0.15%	7.71%	down0.15%
3-year ARM	—	0.00%	—	0.00%

Here is a Summary of Government Loans:

PROGRAM	RATE	1W CHANGE	APR	1W CHANGE
30-Year Fixed Rate FHA	7.26%	up0.43%	8.30%	up0.44%
30-Year Fixed Rate VA	6.48%	up0.08%	6.70%	up0.08%
15-Year Fixed Rate FHA	5.52%	down0.26%	6.48%	down0.27%
15-Year Fixed Rate VA	5.94%	up0.01%	6.29%	up0.01%

Here is a Summary of Jumbo Loans:

PROGRAM	RATE	1W CHANGE	APR	1W CHANGE
30-Year Fixed Rate Jumbo	7.30%	down0.03%	7.70%	down0.05%
15-Year Fixed Rate Jumbo	6.67%	up0.06%	6.90%	up0.02%
7-year ARM Jumbo	7.53%	0.00%	8.06%	0.00%
5-year ARM Jumbo	7.53%	down0.19%	8.05%	down0.06%
3-year ARM Jumbo	—	0.00%	—	0.00%

Why the Drop in ARM Rates Matters

A 21 basis point decrease might not seem like a massive change, but it can translate to real savings over time. More importantly, it signals a potential shift in market sentiment. Here’s the breakdown of why this drop warrants attention:

• Lower Initial Payments: ARMs typically offer lower initial interest rates compared to fixed-rate mortgages. This can make homeownership more accessible, especially for first-time buyers or those with tighter budgets.
• Potential Savings: If interest rates remain stable or decrease during the initial fixed-rate period of the ARM (in this case, 5 years), borrowers could save a significant amount of money compared to a fixed-rate mortgage.
• More Buying Power: A lower initial rate means you can often qualify for a larger mortgage, opening up possibilities for a wider range of homes.

The ARM Advantage: Is It Right for You?

Okay, so ARMs are tempting, but they aren't for everyone. The big question is whether you're comfortable with the potential for interest rate adjustments after the initial fixed-rate period. Here's how to figure out if a 5-year ARM might be a good fit:

• Short-Term Homeownership: Are you planning to move within the next 5-7 years? If so, an ARM could be a great way to save money during your time in the home. You’ll get the benefit of the lower rate without risking a rate hike.
• Rate Hike Tolerance: Ask yourself what will happen if the rates were to go up? Do you have the capability to pay extra? Can you absorb any increase?
• Refinancing Strategy: If your plan is to refinance into a fixed-rate mortgage before the ARM adjusts, a 5-year ARM could make sense. However, keep in mind that refinancing isn't always guaranteed, and you'll need to factor in closing costs.
• Financial Stability: It is important that you have stable finances to absorb any mortgage costs. This strategy would not be for you, if you are not financially stable.

Fixed Rate Still King: Why Stability Still Holds Appeal

Despite the allure of a lower initial rate, fixed-rate mortgages remain the most popular choice for many borrowers. Here's why:

• Predictability: With a fixed-rate loan, you know exactly what your monthly payments will be for the entire loan term. This provides peace of mind and makes budgeting easier.
• Protection Against Rising Rates: If interest rates rise, your mortgage rate stays the same. This can save you a lot of money in the long run.
• Long-Term Security: If you plan to stay in your home for the long haul, a fixed-rate mortgage can provide long-term financial security.

My Thoughts:

As a seasoned market watcher, I can tell you that making a decision regarding a mortgage is never easy. It's always a gamble. The current situation is tough. The economy can change on a dime. So, before you decide on whether an ARM is right for you, make sure you speak to a financial advisor.

I've seen people save a ton of money by playing the ARM game right, but I've also seen people get burned when rates climbed unexpectedly. So, it's all about knowing your risk tolerance and doing your homework. To break it down for you:

• Don't just chase the lowest rate. Look at the big picture – your financial goals, your job security, and your long-term plans.
• Shop around for the best deal. Don't settle for the first offer you get. Talk to multiple lenders and compare rates, fees, and terms.
• Read the fine print. Make sure you understand all the terms and conditions of the mortgage, including the adjustment caps on the ARM.

Weighing Your Options

The drop in the 5-year ARM rate on June 17, 2025, is a noteworthy event that could benefit certain homebuyers. However, it's crucial to carefully weigh the pros and cons of ARMs versus fixed-rate mortgages before making a decision. Consider your financial situation, your risk tolerance, and your long-term goals.

Remember, there's no one-size-fits-all answer when it comes to mortgages. What works for your neighbor might not work for you. Take the time to research your options, consult with a mortgage professional, and make an informed decision that's right for your individual circumstances. With a little bit of planning and preparation, you can navigate the mortgage market with confidence and achieve your homeownership dreams.