Is an adjustable-rate mortgage worth it this September?

Published: Tuesday, September 9, 2025 at 6:57 pm

Adjustable-Rate Mortgages: A Smart Move in a Shifting Market?

Mortgage interest rates recently dipped to an 11-month low, and further declines are anticipated. This comes as the Federal Reserve is widely expected to cut rates, potentially encouraging hesitant homebuyers to re-enter the market. However, with the average rate for a 30-year fixed mortgage at 6.50%, rates remain significantly higher than the historically low levels seen a few years ago.

One strategy gaining attention is the adjustable-rate mortgage (ARM). ARMs offer lower initial interest rates compared to fixed-rate mortgages. For example, a 7/1 ARM, where the rate is fixed for the first seven years, currently has a rate of 5.97%. A 10/1 ARM, fixed for ten years, is at 6.18%. This can provide immediate savings for borrowers.

The appeal of an ARM extends beyond immediate savings. It allows borrowers to assess the market over several years. This provides time to build equity and pay down the mortgage at a lower cost. Furthermore, ARMs can offer protection against short-term rate volatility. If rates remain low or stabilize, borrowers can refinance into a fixed-rate option later.

However, ARMs are not suitable for everyone. They require a willingness to revisit the rate after the initial fixed period. Borrowers must carefully consider the terms and costs to ensure long-term affordability.

BNN's Perspective:

The decision to pursue an ARM requires careful consideration of individual financial circumstances and risk tolerance. While the potential for lower initial rates and market flexibility is attractive, the inherent risk of rate adjustments should not be overlooked. Borrowers should thoroughly assess their ability to manage potential rate increases in the future.

Keywords: adjustable-rate mortgage, ARM, mortgage rates, interest rates, Federal Reserve, rate cut, homebuyers, fixed-rate mortgage, refinancing, market volatility, 7/1 ARM, 10/1 ARM, mortgage options

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