5/1 ARM rates

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Today’s 5/1 ARM Rates

The table below brings together a comprehensive national survey of mortgage lenders to help you know what are the most competitive 30-year mortgage rates. This interest rate table is updated daily to give you the most current rates when choosing a 30-year mortgage loan.

Product Interest Rate APR
5/1 ARM 3.070% 4.060%
7/1 ARM 2.950% 3.960%
10/1 ARM 3.040% 3.910%

What is a 5/1 ARM loan?

As the name suggests, the interest rate on an adjustable-rate mortgage, or ARM, changes over time. For a five-year ARM, the introductory rate stays the same for five years. Then the rate can change once a year, typically rising as much as 2 percentage points at a time.

How does a 5/1 ARM work?

The amortization schedule is the same as for a 30-year mortgage. The variable interest rate after the fifth year is determined by an index. Until recently, the London Interbank Offered Rate, or LIBOR, was the benchmark of choice. As of September 2020, the Secured Overnight Financing Rate, or SOFR, had replaced LIBOR.

When should you consider a 5/1 ARM?

ARMs are a good option when rates are high. ARMs first became available to American homeowners in 1981, a year when the average rate on a 30-year loan surged past 18 percent. As mortgage rates rode a rollercoaster through the 1980s, homeowners often flocked to ARMs. Rates spiked in 1984 and again in 1987, and ARMs made up more than two-thirds of all mortgages during those periods of rising rates. With fixed rates at record lows as of September 2020, ARMs probably aren’t the wisest choice. That’s reflected by the small number of borrowers taking ARMs — they account for less than 3 percent of mortgage applications.

The only way an ARM would make sense is if the rate and other fees combined equal a lower APR than a fixed mortgage for the term, and that’s not happening at this time in the marketplace.