Navigating the home loan market can feel like trying to find your way through a maze, especially when you hit that big fork in the road: fixed-rate or adjustable-rate mortgage? If you're looking to buy a home in the near future, you're probably asking, is it better to have a fixed or adjustable-rate mortgage in 2025?

Is It Better to Have a Fixed or Adjustable-Rate Mortgage in 2025?

For most homebuyers in 2025, a fixed-rate mortgage will likely offer greater peace of mind and financial stability. While adjustable-rate mortgages (ARMs) sometimes attract borrowers with the promise of lower initial rates, the current data for mid-2025 suggests that particular advantage isn't quite there, making the steady predictability of a fixed rate even more appealing.

I've been watching the housing and mortgage markets for years, and one thing that's always true is that the “best” choice depends on your personal situation. But based on what we're seeing, let's dive in and figure out what might work for you.

Fixed vs. Adjustable: What's the Big Deal?

Before we get too deep into the 2025 specifics, let's make sure we're on the same page about these two main types of home loans.

The Old Faithful: Fixed-Rate Mortgages

A fixed-rate mortgage is pretty much what it sounds like. The interest rate on your loan is set, or “fixed,” for the entire life of the loan, whether that's 15, 20, or the popular 30 years.

• Pros:
  • Predictability is King: Your principal and interest payment stays the same every month. This makes budgeting a whole lot easier. No surprises!
  • Peace of Mind: You don't have to worry about market swings causing your mortgage payment to suddenly shoot up.
  • Simplicity: It's straightforward to understand.
• Cons:
  • Potentially Higher Initial Rate: Sometimes, the starting rate on a fixed-rate loan can be a bit higher than the introductory rate on an ARM.
  • Missing Out on Rate Drops: If interest rates fall significantly after you've locked in your rate, you'd have to refinance (which has costs) to take advantage of them.

The Flexible Flyer: Adjustable-Rate Mortgages (ARMs)

An adjustable-rate mortgage (ARM), on the other hand, has an interest rate that can change over time. Usually, you get a lower, fixed “teaser” rate for an initial period (like 3, 5, 7, or 10 years). After that, your rate adjusts periodically (often once a year) based on a specific financial index, plus a margin set by the lender.

• Pros:
  • Lower Initial Payments: Historically, the biggest draw for ARMs has been that introductory rate, which could be noticeably lower than fixed rates, meaning smaller payments at first.
  • Benefit from Falling Rates (Potentially): If overall interest rates go down, your ARM payment could also decrease after an adjustment.
• Cons:
  • Payment Shock Risk: This is the big one. If interest rates rise, your monthly payment could go up significantly after the fixed period ends. This can be a real shock to the budget.
  • Complexity: ARMs have more moving parts – introductory periods, adjustment caps (limits on how much the rate can change at one time or over the life of the loan), indexes, and margins. They can be harder to fully understand.
  • Uncertainty: It’s tough to predict where rates will be years down the line.

Common ARM types include 5/1 ARMs (fixed rate for 5 years, then adjusts annually) or 7/1 ARMs (fixed for 7 years, then adjusts annually).

What's Happening with Mortgage Rates in Mid-2025?

To really answer the question about which mortgage is better in 2025, we need to look at what rates are actually doing. According to Zillow's data as of Friday, May 16, 2025, here’s a snapshot of the national average rates for conforming loans (these are loans that meet guidelines set by Fannie Mae and Freddie Mac):

Loan Program	Interest Rate	1W Change	APR	1W Change
30-Year Fixed Rate	6.98%	up 0.02%	7.46%	up 0.04%
15-Year Fixed Rate	6.05%	up 0.03%	6.37%	up 0.05%
5-year ARM	7.72%	up 0.06%	8.02%	down 0.01%

(Data source: Zillow, updated May 16, 2025, for conforming loans)

Now, what jumps out at me immediately from this table? The 5-year ARM rate at 7.72% is significantly higher than the 30-year fixed rate at 6.98%. This is a really important point for 2025. Traditionally, people considered ARMs because that initial rate was lower. If the ARM is starting out higher, a big part of its appeal is gone.

It's also important to look at the APR (Annual Percentage Rate). The APR includes not just the interest rate but also other loan costs like lender fees and discount points. So, it gives you a broader picture of the loan's true cost. Notice the APR for the 5-year ARM is 8.02%, compared to 7.46% for the 30-year fixed.

A Quick Look Back: 90-Day Rate Trends (February – May 2025)

Looking at the Zillow data for the 90 days leading up to mid-May 2025 (for borrowers with a 740+ credit score and 20%+ down payment), we saw some definite movement:

• 5-Year ARM: This was a bit of a rollercoaster. It started around 6.5% interest in mid-February, dipped to nearly 6.0% in early March, then climbed, even hitting above 7.4% in late April. By May 16th, the daily tracking data showed it around 7.077%. This volatility is classic ARM behavior.
• 15-Year Fixed: This showed more stability. It began near 5.85% in mid-February, saw a low point around 5.49% in early March, and then generally trended up, ending the 90-day period near 6.03%.
• 30-Year Fixed: Similar to the 15-year, it started around 6.5% in mid-February, dropped to about 6.2% in early March, and then rose, finishing the 90 days around 6.78%.

The key takeaway from these trends is that while fixed rates did see some ups and downs, the ARM showed more pronounced swings. And importantly, the current average 5-year ARM rate (7.72%) is now notably higher than where it was even at its peak in the 90-day detailed tracking for high-credit borrowers. This suggests the broader market for ARMs might be pricing in more risk or different conditions.

Why a Fixed-Rate Mortgage Looks Like the Winner for Most in 2025

Based on what I'm seeing in the mid-2025 data, I lean towards a fixed-rate mortgage being the better choice for the majority of homebuyers. Here’s why:

1. Predictable Payments are Golden: Knowing your principal and interest payment won't change for the life of your loan is huge. It makes financial planning so much simpler. In an economy that still has some question marks, this stability is incredibly valuable.
2. ARMs Aren't Offering an Initial Rate Bargain Right Now: The main historical selling point of an ARM was a lower starting interest rate. With the average 5-year ARM at 7.72% and the 30-year fixed at 6.98% (as of May 16, 2025, from Zillow's summary), that advantage is gone. You'd be paying more from day one with the ARM shown, for the “privilege” of taking on future rate risk.
3. Avoiding the “What If” Game: With a fixed rate, you don't have to stress about where interest rates will be in 5 or 7 years. If rates do drop significantly in the future, refinancing is always an option (though it comes with costs and isn't guaranteed). But you won't be forced into a higher payment if rates climb.
4. Simplicity: Fixed-rate loans are just easier to understand. Fewer variables, less jargon. When you're making one of the biggest financial decisions of your life, simplicity can be a real comfort.

From my experience, people often underestimate the value of financial peace of mind. A fixed-rate mortgage locks in your housing cost, which is often the biggest part of your budget.

Could an Adjustable-Rate Mortgage Ever Make Sense in 2025?

Even though fixed rates look more attractive overall right now, there are always specific situations where an ARM might be considered. But given the current rate environment where ARMs are starting higher, these scenarios become even more niche:

• You're Certain You'll Sell Soon: If you absolutely know you'll sell the home before the ARM's initial fixed-rate period ends, then the long-term rate adjustments don't matter as much. However, you'd still be starting with a higher rate (based on current Zillow data) than a 30-year fixed. This makes this argument weaker than it used to be.
• You Expect a Major Income Jump: If you're confident your income will increase substantially before the rate adjusts, you might feel comfortable handling a potentially higher payment. This is a big “if” and relies on a lot of optimism.
• You're a Sophisticated Borrower with a High Risk Tolerance (and a Crystal Ball?): If you have a deep understanding of financial markets, a strong financial cushion, and are convinced rates will plummet significantly and stay low after your ARM starts adjusting, then perhaps. But this is a risky gamble, especially when the initial ARM rate isn't offering a discount.
• Specific Jumbo Loan Scenarios: Sometimes, in the jumbo loan market (for loan amounts above conforming limits), ARM offerings might have different rate dynamics. As of May 16, 2025, Zillow shows a 5-year ARM Jumbo at 7.89% and a 30-year Fixed Rate Jumbo at 7.48%. So, even here, the fixed is starting lower.

Honestly, with the 5-year ARM rate currently exceeding the 30-year fixed rate, it’s tough to build a strong case for an ARM for most people in 2025. The usual “I'll get a lower rate now and refinance later” strategy doesn't hold up if the “lower rate now” isn't actually lower.

More Than Just Fixed vs. Adjustable: Other Big Factors

Choosing the right mortgage isn't just about the rate type. Here are some other things I always tell people to think about:

• Your Personal Financial Picture: How stable is your job and income? How much do you have in savings? What’s your overall debt load? And importantly, how comfortable are you with risk?
• How Long Will You Be in the Home? This is a classic consideration. The longer you plan to stay, the more sense a stable, fixed-rate loan usually makes.
• The Broader Economic Picture: While none of us have a crystal ball, pay attention to what economists are saying about inflation, Federal Reserve policy, and the general direction of interest rates. If the consensus is for rates to rise or remain volatile, a fixed rate offers protection.
• ARM Caps are Crucial (If You Go That Route): If you do consider an ARM, understand the caps!
  • Periodic adjustment caps: Limit how much the rate can increase at each adjustment.
  • Lifetime caps: Limit how much the rate can increase over the entire loan term. These caps offer some protection but don't eliminate the risk of higher payments.
• Always, Always Compare the APR: As I mentioned, the APR gives you a more complete cost picture. Don't get swayed by just a low interest rate advertisement; look at the APR.

My Two Cents:

Having been through the mortgage process myself and having talked with countless friends, family members, and clients over the years, my general advice trends towards caution when it comes to ARMs. The allure of a lower initial payment can be strong, but the potential for future payment shock is a serious risk that can cause a lot of stress and financial strain.

In the specific context of 2025, with the Zillow data showing average 5-year ARM rates higher than 30-year fixed rates, the argument for fixed-rate mortgages becomes even stronger. Why take on the uncertainty of an ARM if you're not even getting an upfront discount on the rate?

The stability of a fixed-rate loan allows you to plan your future with more confidence. You know what your largest monthly expense will be, and that's a powerful thing. While no one wants to pay a higher interest rate than they have to, the rates we're seeing in mid-2025 (around 7% for a 30-year fixed) are what they are. If you can afford the payment on a fixed-rate loan, locking it in provides security.

Think about it this way: a mortgage is a long-term commitment. For most people, choosing the path of predictability and stability is often the wisest course, especially when the alternative (an ARM in the current 2025 market) doesn't seem to offer a compelling initial financial advantage.

Tips for Snagging the Best Mortgage Possible in 2025

Whether you ultimately lean towards a fixed or (less likely in 2025) an adjustable-rate loan, here’s how to put yourself in the best position:

1. Shop Around Relentlessly: Don't just go with the first lender you talk to or the one your real estate agent suggests. Get quotes from multiple lenders – banks, credit unions, online mortgage companies. Rates and fees can vary more than you think.
2. Compare Official Loan Estimates: Once you have offers, compare the official Loan Estimates side-by-side. Pay close attention to the interest rate, APR, lender fees, and closing costs.
3. Boost That Credit Score: Your credit score is a huge factor in the rate you'll get. Before you apply, check your credit report for errors and do what you can to improve your score (pay bills on time, reduce credit card balances).
4. Save for a Healthy Down Payment: While 20% down isn't always required, a larger down payment can often get you a better rate and helps you avoid Private Mortgage Insurance (PMI).
5. Consider Shorter Loan Terms (If You Can Afford It): A 15-year fixed mortgage (currently around 6.05% via Zillow) will have higher monthly payments than a 30-year, but you'll pay it off much faster and save a ton in interest. If your budget allows, it's a great option.
6. Ask Questions! Don't sign anything you don't understand. Your lender should be able to explain all the terms and costs clearly.

So, Fixed or Adjustable in 2025? The Final Verdict for You

So, back to our main question: Is it better to have a fixed or adjustable-rate mortgage in 2025?

For the vast majority of homebuyers, I believe a fixed-rate mortgage is the more prudent and financially sound choice in 2025. The primary reason is the current interest rate environment. With average 5-year ARM rates actually higher than 30-year fixed rates (7.72% vs. 6.98% as of mid-May 2025, according to Zillow), the traditional incentive for choosing an ARM – a lower initial interest rate – simply isn't there.

A fixed-rate mortgage offers you:

• Payment stability: Your principal and interest payment won't change.
• Budgeting certainty: Easier to plan your finances long-term.
• Protection from rate hikes: You're insulated if market rates go up.

An ARM could still be a niche consideration if you have a very specific, short-term plan for the property and an extremely high tolerance for risk, but the current rate disadvantage makes it a much harder sell.

Ultimately, the decision is yours. Take a good, hard look at your financial situation, your plans for the future, and your comfort level with risk. Talk to a trusted financial advisor or mortgage professional who can help you weigh the pros and cons based on your unique circumstances. But based on the 2025 mortgage rate data we have, the path of predictability offered by a fixed-rate loan looks like the clearest and safest one for most people stepping into homeownership this year.