Compare Current 5/1 ARM Rates for Top Lenders
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Rates data is based on a borrower with good credit, a conforming loan amount (at least $200,000 but less than the national conforming loan amount), and a loan-to-value ratio of less than 80% (For purchase loans, this corresponds to a down payment of 20% or more). © Zillow, Inc., 2006-2016. Use is subject to Terms of Use
U.S. News Expert Insights, Week Ending July 8
Mortgage Rates Rise as Iran Conflict Resumes
“National average mortgage rates increased this week, according to Zillow data provided to U.S. News. For purchase loans, the 30-year fixed rate increased to 6.669%, up from 6.573% the week prior. Interest rates for mortgage refinancing also increased, averaging 6.76% for the 30-year term and 5.78% for the 15-year repayment period.
“Mortgage rates were driven higher by the U.S.-Iran war, as both sides traded strikes over the July 4 holiday weekend. Renewed fighting in the Middle East has caused oil prices to rise, and rising oil prices can cause inflation to reverberate throughout the entire economy as items become more expensive to manufacture and transport. Mortgage interest rates track 10-year Treasury yields, and the bond market is highly sensitive to inflationary pressures.
“Until a more permanent resolution is reached between the U.S. and Iran, mortgage rates are likely to stay higher for longer. In an environment of elevated mortgage rates, consumers who are looking to buy a home or refinance their mortgage could get more favorable pricing by shopping around with multiple lenders. It’s also a good time to lock in a mortgage rate given all the upward pressure on bond yields.”
– Erika Giovanetti, U.S. News Consumer Lending Analyst
An adjustable-rate mortgage is a home loan with an interest rate that changes over time according to a benchmark rate. This differs from fixed-rate mortgages, which have rates that remain the same for the entire loan term.
The three most common types of ARMs are hybrid, interest-only and payment-option.
- A hybrid ARM is the most common type of adjustable-rate mortgage. It has an initial interest rate that remains fixed for an introductory period and then adjusts periodically afterward. So a 5/1 adjustable-rate mortgage’s rate is fixed for the first five years and then adjusts every year. A 3/1, 7/1 or 10/1 ARM works the same way, adjusting annually after the initial fixed-rate period (three, seven or 10 years, respectively). However, if the second number is six, such as a 7/6, your rate may adjust every six months after the initial fixed period.
- An interest-only ARM allows borrowers to make lower, interest-only payments during an initial period. After that, the loan is amortized over its remaining term, and the monthly payment can increase substantially.
- A payment-option ARM allows the borrower to choose from multiple payment options: a fully-amortized principal and interest payment, an interest-only payment and a minimum payment. When the minimum payment is less than the interest due, the loan balance increases. This is called negative amortization.
How Does a 5/1 ARM Work?
During the initial fixed period, a hybrid ARM acts just like a fixed rate mortgage. Once the fixed period ends, the loan’s rate and payment reset according to these factors:
- The loan’s index
- The loan’s margin
- The loan’s rate adjustment caps and floors
To calculate your loan’s interest rate after the fixed-rate period, lenders use a benchmark index, which is a published interest rate that reflects general economic conditions. Many lenders use the Constant Maturity Treasury index or the U.S. prime rate, according to the Consumer Financial Protection Bureau.
Lenders then add a margin to the index. Margins are part of the loan’s pricing and depend on many factors, including your creditworthiness and the lender’s policy. Margins generally range from 1.75% to 3.5% and vary from lender to lender, so it’s a good idea to note these things when comparing loans.
Pros
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Lower initial interest rate than a fixed-rate loan.
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Rate cap structure prevents quick, drastic changes in your monthly payments.
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Five years to refinance or sell your home.
Cons
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Interest rate and monthly payments may increase after the five-year period.
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Your future financial situation could hinder your ability to refinance at a competitive rate or make larger payments.
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Lack of stability and added complexity.
ARM loans have rate caps, which limit how high their interest rates can go. These protect borrowers from sudden spikes in their payments. ARMs also have rate floors, which protect lenders by limiting how low a loan’s rate can go. There are several types of caps.
- Initial adjustment cap. This cap limits how much the interest rate can increase the first time it adjusts after the fixed-rate period.
- Subsequent adjustment cap. This cap limits how much the interest rate can increase in the adjustment periods after the first one. It’s generally lower than the initial adjustment cap.
- Lifetime adjustment cap. This cap limits how much the interest rate can increase during the entire life of the loan.
The typical cap structure for an ARM is either 2 or 5 percentage points for the initial adjustment, 2 percentage points for subsequent adjustments, and 5 percentage points for the life of the loan, although it varies by lender and loan type. So if you have a 5/1 loan with a 5% initial rate and a lifetime cap of 5 percentage points, your highest possible rate is 10%.
How low can your rate go? Fannie Mae states that floors on its standard ARMs are equal to the loan’s margin. Other lenders may set higher floors. Rate caps and floors are not standard and can vary among lenders and programs. It’s smart to compare and run the numbers before committing to a loan.
The ARM mortgage is a double-edged sword that can work for you or against you.
When an ARM Makes Sense
An adjustable-rate mortgage offers a competitively low interest rate for those who can avoid or minimize the impact of a potentially higher rate in the future. It may make the most sense to get a 5/1 ARM if:
- You expect interest rates to drop. In that case, a 5/1 offers a lower rate than a fixed-rate loan and an even better deal if interest rates go down, while fixed-rate borrowers pay a higher rate and have to refinance to lower their payments when rates drop.
- You plan on selling your home within the next five years or so. If you sell your home or refinance your mortgage before your rate adjusts, you eliminate the risk of rising rates and monthly payments.
- You (confidently) expect your income to increase before the rate adjusts. For example, a military family on limited deployment or a medical student who will become a doctor might be a candidate for an ARM.
When to Avoid an ARM
An ARM is not the best choice for every borrower because of the potential for rate increases over time. ARMs can be complex and terms can be difficult to understand, so you should be fully familiar with their benefits and drawbacks before moving forward. You might want to avoid the 5/1 ARM if:
- The initial rate isn’t much lower than a fixed mortgage. One selling point of ARMs is that the rate could go down. But depending on greater economic conditions, adjustable mortgage rates can sometimes be higher than fixed mortgage rates.
- You expect mortgage rates to increase in the future. You may be surprised at how much the payment can increase in the future or at the challenges you could face in selling or refinancing the property.
- You plan to keep your home (and your mortgage) much longer than five years. Mortgage refinancing isn’t free – typical closing costs run 2% to 5% of the loan amount. So be sure to calculate your breakeven point to see if it would be worth refinancing to a fixed rate down the line.
When you shop for an adjustable-rate mortgage, compare costs and repayment terms as well as customer service ratings. Here’s what to look for:
Interest rates. The loan’s start rate determines your rate and payment for the first five years – which might be the entire time you have the loan. So this may be the most important factor.
Closing costs. There is a trade-off when you consider closing costs. Generally, lower upfront costs are associated with higher interest rates, and vice versa. If you are looking for a loan with the lowest possible out-of-pocket cost, your rate and payments will be higher.
Rate caps. While it’s typical for ARMs to have initial caps of 2 or 5 percentage points and subsequent caps of 2 percentage points, there’s no standard structure. It’s important to compare lenders because these higher caps mean larger potential increases.
The repayment structure of an adjustable-rate mortgage can be complex, so make sure you understand the terms of your loan before signing. Your lender should provide you with two documents: an ARM disclosure notice, which spells out the specifics of your loan, and the Consumer Handbook on Adjustable Rate Mortgages, or CHARM. You should know the following before committing to a loan:
- What is your introductory interest rate and how long does it stay fixed?
- What index is used to calculate the loan’s rate when it begins adjusting?
- How often can your interest rate change after the introductory period?
- What margin is the lender charging?
- What are the initial, subsequent and lifetime adjustment caps of the loan?
Customer service. As with any major purchase, find out what other customers say. You may be tied to this lender for years or decades, so choose one that has demonstrated an ability to provide good customer service. Read lender reviews and check the Consumer Financial Protection Bureau’s Consumer Complaint Database and the Better Business Bureau to learn more about common customer complaints.
Average Mortgage Rates, Daily
Data as of: 7/12/2026
Rates data is based on a borrower with good credit, a conforming loan amount (at least $200,000 but less than the national conforming loan amount), and a loan-to-value ratio of less than 80% (For purchase loans, this corresponds to a down payment of 20% or more). © Zillow, Inc., 2006-2016. Use is subject to Terms of Use
