ARM Share Hits Highest Level Since 2025 as Rates Ease: How a 5/1 ARM Compares With a 30-Year Fixed
Adjustable-rate loans were 11.4% of mortgage applications in MBA's latest survey. Here's what the 6.29% versus 7.30% gap means, and what to check before choosing an ARM.
By Anthony Brikho · 5 min read
Mortgage rates eased for a third straight week, but borrowers are increasingly looking past the 30-year fixed loan. In its Weekly Mortgage Applications Survey released Nov. 4, the Mortgage Bankers Association said adjustable-rate mortgages made up 11.4% of applications in the week ending Oct. 30. MBA chief economist Mike Fratantoni said that is the highest ARM share since September 2025.
What the latest survey shows
MBA's Market Composite Index, which tracks total application volume, fell 1.2% from the week before on a seasonally adjusted basis. The seasonally adjusted Purchase Index dropped 2%, and unadjusted purchase activity was 19% lower than a year earlier. The Refinance Index rose 0.1% but was 60% below the same week last year. Refinances made up 39.8% of applications, up from 38.9%.
The average contract rate on a 30-year fixed conforming loan fell to 7.30% from 7.37%, with 0.75 point. The 5/1 ARM average fell to 6.29% from 6.41%, with 1.00 point. Those averages are for loans with 80% loan-to-value. "More borrowers are choosing ARMs in this environment to lower their initial payments," Fratantoni said.
| Loan type | Rate | Prior week | Points |
|---|---|---|---|
| 30-year fixed, conforming | 7.30% | 7.37% | 0.75 |
| 30-year fixed, jumbo | 7.20% | 7.28% | 0.48 |
| 30-year fixed, FHA | 7.02% | 7.12% | 1.07 |
| 15-year fixed | 6.76% | 6.70% | 0.98 |
| 5/1 ARM | 6.29% | 6.41% | 1.00 |
These are survey averages, not quotes. Your rate depends on your credit, down payment, loan size, property and lender, so it can be well above or below them.
How a 5/1 ARM works
A 5/1 ARM has a fixed rate for the first five years. After that, it adjusts once a year. The Consumer Financial Protection Bureau explains that the new rate is set by adding a fixed margin to an index. Caps limit how far the rate can move at the first adjustment, at each later adjustment and over the life of the loan. Your Loan Estimate shows these terms in its "Adjustable Interest Rate (AIR) Table" and the highest payment the loan allows.
An illustrative payment comparison
The figures below are hypothetical. They use MBA's average rates and leave out taxes, insurance, mortgage insurance and points. On a $350,000 loan, principal and interest would be about $2,399 a month at 7.30% fixed and about $2,164 at a 6.29% 5/1 ARM rate. That's a difference of roughly $235 a month, or about $14,100 over the five-year fixed period.
After five years, about $326,800 would still be owed on the ARM. If the rate rose by two percentage points at the first adjustment, to 8.29%, principal and interest would climb to about $2,586. That would be roughly $186 above the fixed payment, and later adjustments could raise it further, up to the lifetime cap. If the rate instead reset to 7.29%, the payment would be about $2,371. No one can know which path rates will take.
What borrowers should check before choosing
- Compare loans with matching terms. Get same-day Loan Estimates for a fixed loan and an ARM with the same loan amount and similar points, then compare rates, APRs and closing costs.
- Find the worst case. Look at the index, margin, caps and highest possible payment. Make sure you could keep paying it if your income doesn't rise.
- Be realistic about how long you'll stay. An ARM can make sense if you expect to sell before the first adjustment. Plans change, though, and a refinance depends on future rates, home values and approval.
- Don't count on refinancing. Today's lower starting rate doesn't guarantee lower rates later, and refinancing brings new closing costs.
The rise in ARM applications shows borrowers looking for relief from payments that have stayed high. It isn't a forecast. With applications still well below last year's levels, the lower starting payment of an ARM is worth weighing against what it could cost after year five.