Mortgage Rates Today: 5-Year ARM Goes Down by 6 Basis Points – August 19, 2025

If you are in the market for a new home or looking to refinance, understanding the current mortgage rate is very important. As of today, August 19, 2025, the national average 5-year ARM (Adjustable-Rate Mortgage) has decreased by 6 basis points, settling at 7.27%, according to data from Zillow. While this might seem like a small change, it signals shifts in the market that I will discuss in this article. Let's break down what it means for you and how the Federal Reserve's decisions are playing a significant role.

Mortgage Rates Today: 5-Year ARM Goes Down by 6 Basis Points – August 19, 2025

A Snapshot of Today's Mortgage Rates

First, here’s a quick overview of how different mortgage types are performing right now:

• 30-Year Fixed: 6.69% (down 1 basis point from yesterday)
• 15-Year Fixed: 5.79% (down 2 basis point from yesterday)
• 5-Year ARM: 7.27% (down 6 basis points from yesterday)

Here’s a more detailed look at the conforming loan rates:

PROGRAM	RATE	1W CHANGE	APR	1W CHANGE
30-Year Fixed Rate	6.69 %	up0.03 %	7.16 %	up0.04 %
20-Year Fixed Rate	6.43 %	down0.24 %	6.90 %	down0.08 %
15-Year Fixed Rate	5.79 %	up0.02 %	6.09 %	up0.02 %
10-Year Fixed Rate	5.48 %	0.00 %	5.84 %	0.00 %
7-year ARM	7.45 %	down0.08 %	8.12 %	up0.12 %
5-year ARM	7.27 %	up0.03 %	7.82 %	up0.01 %
3-year ARM	—	0.00 %	—	0.00 %

Source: Zillow – August 19, 2025

Why Focus on ARMs?

Adjustable-Rate Mortgages (ARMs) can be appealing, especially when rates for fixed mortgages are high. The initial rate on an ARM is often lower than a fixed-rate mortgage. In today's market, where the 30-year fixed rate sits at 6.69%, a 5-year ARM at 7.27% may not seem like a deal initially, but understanding the broader economic context is crucial.

The reason I believe ARM rates are really important right now: They directly reflect market expectations about near-term interest rate movements, influenced so much by meetings of the Fed. The small decrease we're seeing today could hint at bigger changes on the horizon.

The Federal Reserve's Influence: A Deep Dive

To really understand where mortgage rates are headed, we need to talk about the Federal Reserve (the Fed). Their monetary policy decisions are what mainly drive the trends in these rates.

From 2021 to 2023, the Fed was in full response mode, with actions varying from keeping mortgage rates at historic lows during the pandemic by purchasing bonds, to then switching gears and combatting inflation and aggressively raising the federal funds rate by 5.25 percentage points.

In late 2024, the Fed started to pivot, cutting rates three times between September and December. This decrease was one percentage point, putting the federal funds rate between 4.25% and 4.5%. Since those end of 2024 cuts, we've had a pause through July 2025, while they took additional measures to consider the economic impact of these decisions.

Economic Factors at Play in 2025

As of today, August 19, 2025, we're seeing a mix of economic factors that are influencing the Fed's decisions:

• Inflation is Stubborn: Core PCE (Personal Consumption Expenditures) remains around 2.7%, and new tariffs could add to the pressure.
• Growth is Slowing: GDP growth has slowed down, and unemployment has increased to 4.2%. We're also seeing fewer new jobs being created.

Because of these factors, there's a ton of expectation that the Fed will cut rates at their upcoming September 16-17 meeting. You can see the market signals point to a high probability (85-95%) of this happening, based on tools like the CME FedWatch Tool.

Why a September Rate Cut Is Likely

There are three things I think are really pointing toward the Fed making a rate cut next month:

• Cooling Inflation: The CPI (Consumer Price Index) has come down to 2.7%, which is getting closer to the Fed's target.
• Labor Market Weakening: With unemployment at 4.2% and fewer new jobs, the Fed has reason to step in and support the economy.
• Predicted Slowdown: Economic forecasts are suggesting a slowdown, which just makes a preemptive stimulus look more necessary.

Keep an eye out for Fed Chair Jerome Powell's speech at the Jackson Hole Economic Symposium on August 22. He's likely to drop more hints about what the Fed will do in September.

How a Rate Cut Will Impact Mortgage Rates

The mortgage rates on 30-year fixed mortgages has hovered close to 6.8% through mid-2025. A cut in September is expected to push rates lower. I believe this will reduce borrowing costs across the board, encouraging business investment and leading to significant movements in both stock and bond markets.

The Fed's own projections from June suggested two rate cuts in 2025. And with a September cut, it could potentially bring mortgage rates down near 6% by the end of the year.

What to Watch Out For

Even though the probability is high, it's important to remember that the Fed's decision isn't guaranteed. If inflation stays higher than expected or the economy shows surprising strength, things could change.

Key Dates and Scenarios

Here are some important dates to keep in mind:

• September 16-17 Meeting: This is when the Fed will likely make a rate cut. They'll also release updated economic forecasts.
• December Meeting: This could be when the Fed makes its second rate cut of 2025.

Looking further ahead, the Fed anticipates slowly lowering rates, with the goal of getting them to around 2.25%-2.5% by 2027.

What This Means for You

Here’s how these trends might affect different people:

• Current Buyers: Although rates are still high, keep an eye on the September meeting. It could bring some relief.
• Refinancers: If your rate is above 7%, pay close attention to what happens in September. You might be able to refinance at a lower rate.
• Investors: The bond markets are sensitive to what the Fed says and does. If there's a confirmed rate cut, bond yields will likely go down.

Final Thoughts: The small decrease in the 5-year ARM rate today is just one piece of a much larger puzzle. By keeping an eye on the Fed's actions and understanding the economic factors at play, you can make smarter decisions about your mortgage and financial future.