Today’s 5-Year Adjustable Mortgage Rate Goes Down by 3 Basis Points – Sept 3, 2025

Good news for those considering an Adjustable-Rate Mortgage (ARM)! According to Zillow, as of September 3, 2025, the national average 5-year ARM mortgage rate has decreased by 3 basis points, bringing it down to 6.88%. This slight dip could be an opportunity to explore financing options, especially if you anticipate interest rate changes in the near future. Let's get into the details and understand what this means for you.

Today’s 5-Year Adjustable Mortgage Rate Goes Down by 3 Basis Points – Sept 3, 2025

Why This Matters: Understanding ARMs and the Current Market

If you're like most people, the world of mortgages can feel like navigating a maze. So, before we dive deeper into this specific rate change, let's quickly recap what an Adjustable-Rate Mortgage (ARM) is. Unlike a fixed-rate mortgage where your interest rate stays the same for the entire loan term, an ARM has an interest rate that adjusts periodically based on market conditions.

The most common type of ARM is the 5-year ARM. This means your initial interest rate stays fixed for five years. After that, the rate adjusts annually (or more frequently, depending on the loan terms) based on a benchmark index plus a margin. ARMs can be a good option if you plan to move or refinance before the adjustment period begins. Or, simply just believe rates will go down in the future.

Why is this important now? Because the Federal Reserve's monetary policy decisions greatly influence mortgage rates. In recent years, we've seen a lot of fluctuation, so understanding the bigger picture is key. The announcement of even a small decrease in rates like today's 3 basis points drop in 5-year ARM can be an indicator of prevailing monetary policy.

A Detailed Look at Today's Mortgage Rate Changes

Here's a snapshot of how various mortgage rates are trending as of today, September 3, 2025:

• 30-Year Fixed Rate: 6.58% (Down 1 basis point)
• 15-Year Fixed Rate: 5.70% (Up 2 basis points)
• 5-Year ARM: 6.88% (Down 3 basis points)

Here's a comparative table with additional data:

PROGRAM	RATE	1W CHANGE	APR	1W CHANGE
30-Year Fixed Rate	6.58 %	Down 0.01%	6.95 %	Down 0.08%
20-Year Fixed Rate	6.28 %	Down 0.15%	6.56 %	Down 0.29%
15-Year Fixed Rate	5.70 %	Up 0.05%	5.94 %	Down 0.01%
10-Year Fixed Rate	5.79 %	0.00 %	6.09 %	0.00 %
7-year ARM	7.08 %	Up 0.03%	7.60 %	Down 0.10%
5-year ARM	6.88 %	0.00 %	7.51 %	Down 0.08%
3-year ARM	—	0.00 %	—	0.00 %

Source: Zillow

Why the Focus on ARMs?

While the 30-year fixed mortgage is a longtime staple, ARMs definitely deserve a spot in the conversation, especially when the interest rate climate is set to get better. Here's why:

• Lower Initial Rate: ARMs often start with a lower interest rate compared to fixed-rate mortgages. This can mean lower monthly payments in the initial years, freeing up cash for other financial goals.
• Potential for Savings: If interest rates fall during the initial fixed-rate period, you benefit when the rate adjusts.
• Flexibility: As mentioned earlier, ARMs can be great if you don't plan to stay in your home long-term. You can take advantage of the lower initial rate without worrying too much about future adjustments.

The Fed's Influence: What's Been Happening

To really understand these rate changes, we need to talk about the Federal Reserve. The Fed plays a huge role in setting the tone for mortgage rates through its monetary policy decisions.

• Pandemic Response: During the pandemic, the Fed bought bonds to keep interest rates low, making mortgages incredibly affordable.
• Inflation Battle: As inflation surged, the Fed aggressively raised the federal funds rate, sending mortgage rates soaring to 20-year highs by mid-2023.
• The Pause and the Pivot: After a period of holding steady, the Fed started cutting rates in late 2024 to offset economic headwinds.

Currently, the Fed has held rates steady through the first half of 2025, with some internal debate about the best course of action. But market sentiment strongly suggests that another rate cut is highly likely at the upcoming September meeting.

What the Market is Signaling

The market is buzzing with anticipation of a Fed rate cut. Factors like cooling inflation and a slightly weakening labor market are fueling these expectations. This anticipation is reflected in the bond market:

• 2-Year Treasury Yield: Around 3.63% (sensitive to Fed expectations)
• 10-Year Treasury Yield: Around 4.23% (a benchmark for mortgages)
• 30-Year Treasury Yield: Around 4.89%

The yield curve is also normalizing, indicating that markets are pricing in future rate cuts. All eyes are now on Fed Chair Jerome Powell for confirmation of this expectation.

How This Impacts You: Buyers, Refinancers, and Investors

So, what does today's news and the broader economic backdrop mean for you?

• Current Buyers: If you're in the market to buy a home, rates are still relatively high, but the expected September rate cut offers a glimmer of hope for more affordable borrowing costs.
• Refinancers: If you have a mortgage with a rate above 7%, keep a close watch on the September meeting. A rate cut could open up a new window for refinancing.
• Investors: The bond market is already pricing in future rate cuts. A confirmed cut could solidify this trend and push yields lower, impacting bond values.

Looking Ahead: Key Dates and Possible Scenarios

Here are some critical dates to mark on your calendar:

• September 16-17 Meeting: The next Fed meeting where a rate cut is widely expected.
• December Meeting: Another potential opportunity for the Fed to further ease monetary policy.

The long-term outlook suggests that the Fed anticipates gradually easing rates, with potential for rates to settle near 2.25%-2.5% by 2027.

The Takeaway

While today's 3 basis point drop in the 5-year ARM is relatively small, it is an indication of the existing shift in monetary policy. With a Fed rate cut likely on the horizon and the overall economy showing signs of cooling, we could be entering a more favorable environment for borrowers in the coming months. So, take the time to evaluate your own financial situation and consider if an adjustable-rate mortgage is the right move for you.