5-Year Adjustable Rate Mortgage Dips to 7.71% Today – July 4, 2025

If you're keeping a close watch on mortgage rates, here's the headline: According to Zillow, as of today, July 4, 2025, the national average for a 5-Year Adjustable Rate Mortgage (ARM) has decreased to 7.71%. This might have you wondering if an ARM is the right choice for you. I'll explain what that means, how it compares to other mortgage types, and why you might (or might not) want to consider it.

Today’s 5-Year Adjustable Rate Mortgage Goes Down to 7.71% – July 4, 2025

Buying a home is one of the biggest financial decisions most of us will ever make. The interest rate on your mortgage has a massive impact on how much you'll ultimately pay for that home. Even a small change in the rate can translate to thousands of dollars over the life of the loan. That's why staying informed about current rates is so critical before you start house hunting or refinance your existing mortgage.

What's Happening with Mortgage Rates Right Now?

Okay, let’s break down what's been happening with different mortgage rates recently. It's a mixed bag, with some rates going up, some going down, and some staying put. Here's a snapshot:

• 30-Year Fixed Rate Mortgage: Remains relatively stable at 6.80%, a slight increase of 0.01% from the previous week. This is the most popular type of mortgage for a reason: it gives you predictable monthly payments for the next 30 years.
• 15-Year Fixed Rate Mortgage: Increased slightly to 5.86%. This is a good option if you can afford higher monthly payments, allowing you to pay off your house more quickly and save a lot on interest.
• 5-Year ARM: The one we're focusing on! It dipped slightly to 7.71%. It's important to understand how these mortgages work before jumping in.

A Closer Look at the 5-Year Adjustable Rate Mortgage (ARM)

So, what exactly is a 5-year ARM? Here's the deal:

• The “Adjustable” Part: Unlike a fixed-rate mortgage, the interest rate on an ARM can change over time. The “5-year” part means that the initial interest rate is fixed for the first five years of the loan.
• After 5 Years: Once that initial period is over, the rate will adjust annually based on a specific index (like the Secured Overnight Financing Rate (SOFR)) plus a margin (a fixed number of percentage points the lender adds.) This means your monthly payments could go up or down, depending on where interest rates are at that time.

Why Would Anyone Choose an ARM?

“Why would anyone pick a mortgage that can change?”, if that is the question going through your head, that’s a good question! Here is the reason:

• Lower Initial Rate: ARMs often start with a lower interest rate than fixed-rate mortgages, as we see today. This can make your monthly payments more affordable in the short term.
• Short-Term Plans: If you're planning to move or refinance within the next five years, an ARM could save you money. You'd benefit from the lower initial rate without worrying too much about future adjustments.
• Betting on Rates: Some borrowers believe that interest rates will go down in the future. If they're right, their ARM rate could adjust downward, saving them even more money. It's a gamble, though.

The Risks of an ARM

Of course, there are risks involved:

• Rate Increases: If interest rates rise after the initial fixed-rate period, your monthly payments could jump significantly. This can strain your budget and even put you at risk of foreclosure if you can't afford the higher payments.
• Complexity: ARMs can be more complicated to understand than fixed-rate mortgages. You need to carefully review the loan terms, including the index, margin, and rate caps (limits on how much the rate can increase).

Comparing Mortgage Rates: A Snapshot (July 4, 2025)

To give you a clearer picture, here’s a breakdown of rates for conforming loans as of today:

Program	Rate	1 Week Change	APR	1 Week Change
30-Year Fixed Rate	6.80%	up 0.01%	7.25%	up 0.01%
20-Year Fixed Rate	6.60%	up 0.35%	7.02%	up 0.39%
15-Year Fixed Rate	5.86%	up 0.05%	6.16%	up 0.05%
10-Year Fixed Rate	5.58%	down 0.12%	5.77%	down 0.23%
7-Year ARM	7.63%	up 0.48%	7.84%	up 0.02%
5-Year ARM	7.71%	up 0.24%	8.04%	up 0.11%

What About Other Loan Types?

It’s not just about conventional loans. Government-backed loans like FHA and VA mortgages also have their own rates:

Government Loans

PROGRAM	RATE	1W CHANGE	APR	1W CHANGE
30-Year Fixed Rate FHA	6.67 %	down0.58 %	7.69 %	down0.59 %
30-Year Fixed Rate VA	6.33 %	up0.06 %	6.54 %	up0.06 %
15-Year Fixed Rate FHA	5.34 %	down0.93 %	6.31 %	down0.93 %
15-Year Fixed Rate VA	5.83 %	up0.05 %	6.17 %	up0.05 %

And for those looking at higher-end properties, Jumbo Loans are also an option:

Jumbo Loans

PROGRAM	RATE	1W CHANGE	APR	1W CHANGE
30-Year Fixed Rate Jumbo	7.12 %	down0.03 %	7.55 %	down0.01 %
15-Year Fixed Rate Jumbo	6.42 %	down0.13 %	6.70 %	down0.10 %
7-year ARM Jumbo	7.42%	0.00%	8.00%	0.00%
5-year ARM Jumbo	7.33%	down0.14%	7.91%	down0.03%

Fixed vs. ARM: Which is Right for You?

The best type of mortgage depends entirely on your individual circumstances. Here’s a quick guide:

• Choose a Fixed-Rate Mortgage If:
  • You want the security of knowing your monthly payments will stay the same.
  • You plan to stay in your home for the long term.
  • You're concerned about interest rates rising in the future.
• Choose an ARM If:
  • You're comfortable with the risk of fluctuating interest rates.
  • You plan to move or refinance within a few years.
  • You believe interest rates will decline in the future.
  • You understand the terms and conditions of the loan completely.

My Take on ARMs

Personally, I tend to be a bit cautious about ARMs. While the lower initial rate can be tempting, the uncertainty of future rate adjustments makes me nervous. I prefer the peace of mind that comes with a fixed-rate mortgage, especially if I plan to stay in a home for a long time. However, that's just my risk tolerance. If you're more comfortable with risk and have a solid financial plan, an ARM could be a good option for you.

Don't Forget the APR!

When comparing mortgage rates, always pay attention to the Annual Percentage Rate (APR). The APR includes not only the interest rate but also other fees and charges associated with the loan. This gives you a more accurate picture of the total cost of borrowing. You can see from the tables above that the APR is always higher than the Rate.

Do Your Homework and Talk to a Lender

Whether you’re leaning towards a fixed-rate mortgage or an ARM, it's crucial to do your research and compare offers from multiple lenders. Talk to a mortgage professional to get personalized advice based on your financial situation and goals. They can help you understand the different loan options and choose the one that's right for you. They can also help you understand all the fine print — which is always important.

The Bottom Line

The drop in the 5-Year ARM rate to 7.71% on July 4, 2025, could be an opportunity for some borrowers. However, it's essential to weigh the risks and benefits carefully before making a decision. Understanding your own financial situation, risk tolerance, and long-term plans is key to choosing the right mortgage for you.