Current ARM Rates – Forbes Advisor
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Compare current variable rate mortgage (ARM) rates to find the best rate for you. Lock in your rate today and see how much you can save.
Current ARM rates
Today’s current ARM rates are as follows:
- ARM 10/1: 4.96% today vs. 4.98% last week
- ARM 7/1: 4.80% today vs. 4.70% last week
- ARM 5/1: 4.24% today vs. 4.04% last week
The 52 week high for a 10/1 ARM was 4.98% and the 52 week low was 4.05%.
The 52 week high for a 7/1 ARM was 4.80% and the 52 week low was 3.86%.
The 52 week high for a 5/1 ARM was 4.24% and the 52 week low was 3.38%.
What is an MRA?
ARMs are home loans whose rates can vary over the life of the loan. Unlike a fixed-rate mortgage, which carries the same interest rate over the life of the loan, ARMs start out with a fixed rate for a short period, say five years, and then adjust.
For example, a 5/1 ARM will have the same rate for the first five years, then may adjust each year thereafter, meaning the rate may go up or down, depending on the market.
How does an ARM work?
ARMs are always tied to a well-known benchmark – a widely published, easy-to-follow interest rate – and reset on a schedule that your lender will tell you in advance. But since there’s no way of knowing what the economy or financial markets will do years from now, they can be a much riskier way to finance a home than a fixed-rate mortgage.
ARM: advantages and disadvantages
ARMs often, but not always, have lower interest rates than fixed rate mortgages. Borrowers typically pay a small premium for the peace of mind of having a fixed rate for many years. This isn’t always the case, however – there were virtually no cost savings from switching to an ARM in the past few years when all interest rates were at rock bottom – so it still pays to shop around .
The risks that accompany MRAs are no longer just hypothetical. The Federal Reserve, which sets interest rates across the economy, has embarked on what most analysts believe will be a multi-year cycle of rate hikes. Any ARM you subscribe to now will almost certainly have a higher, if not considerably higher, rate when it resets in a few years.
But an ARM can still be a great option for you, especially if you don’t plan on staying home for long. Some ARMs have initial rates that last five years, but others can last up to seven or 10 years.
ARM Vs. Fixed Rate Mortgages
Fixed rate mortgages are often considered a wiser option for most borrowers. Being able to lock in a low interest rate for 30 years, while having the flexibility to refinance as you wish, if conditions change, often makes the most financial sense. Not to mention, it’s predictable, so you know exactly what your rate will be for the life of the loan.
But not everyone expects to stay at home for years and years. You may be buying a first home with the intention of building capital before moving on to a “forever home”. In this case, if an ARM has a lower interest rate, you may be able to direct more of your money into that nest egg.
Alternatively, an ARM with a lower rate than a fixed rate mortgage may simply be more affordable for you. As long as you’re comfortable with the idea of selling your home or moving on before the initial ARM rates reset – or risk being able to afford the new higher payments – it can also be a reasonable choice.
How to get the best ARM rate
Several studies have shown that borrowers who shop around get better rates and terms than those who settle for the first option they find. If you’re unsure whether an ARM or a fixed rate mortgage is best for you, you should research lenders that offer both. A mortgage professional like a broker can also help you weigh your options.
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Frequently Asked Questions (FAQs)
When should you consider an ARM?
You might want to consider an ARM if you’re not planning on staying home for a long time. Many ARMs have an initial fixed rate term of five, seven, or 10 years, which can be about as long as you expect to own the home.
Another good reason to consider an ARM is if you can’t afford the monthly payment with a fixed rate mortgage. However, you will want to make sure you have an exit strategy before the ARM resets at a higher rate. You might also have owned the home for a while and need a slightly lower monthly payment for a while before you prepare to sell in a few years.
Why are ARM rates lower than fixed rates?
Except in exceptional circumstances, borrowers generally pay a little more for the peace of mind that comes with a long-term, fixed-rate mortgage. ARMs are riskier because they reset at a different (likely higher) rate after their initial phase is over.
What factors affect ARM rates?
Everything from global supply chain snafus to monetary policy decisions to bond market maneuvers can affect ARM rates. In other words, it can be difficult to predict interest rates in a few weeks, and especially in a few years. This is why ARMs are considered riskier than fixed rate mortgages.