Fixed mortgage rates have climbed for weeks, and more buyers are looking at the alternative. Freddie Mac’s survey put the average 30-year fixed rate at 7.28 percent in the week of Oct. 1, up from 7.03 percent a week earlier and 6.34 percent a year earlier. The 15-year average was 6.60 percent.
Adjustable-rate mortgages are gaining ground, according to the Mortgage Bankers Association’s survey for the week ending Sept. 25. “ARM loans, with rates around 80 basis points lower than fixed-rate loans, accounted for 10.3% of applications, the highest share since October 2025,” said Joel Kan, the association’s vice president and deputy chief economist, as reported by HousingWire.
What the rates look like now
The association’s figures are averages of contract rates for the week ending Sept. 25. Freddie Mac stopped publishing adjustable rates in November 2022, and says ARMs remain most popular for larger loans above the conforming limit. That matters in a town like Westport, where a buyer putting 20 percent down usually borrows above the conforming line, as our rate math shows.
How an adjustable loan works
An ARM’s name tells you its schedule. In a 5/1 or 5/6m loan, the first number is the length of the initial fixed period in years, and the second is how often the rate changes afterward, once a year or every six months, the Consumer Financial Protection Bureau explains.
When the initial period ends, the new rate is an index, a market rate the lender picks, plus a margin set in your loan agreement, subject to caps. The CFPB notes that the margin can vary a lot between lenders and can be negotiated like a fixed rate. The caps limit how far the rate can move at the first change, at each later change and over the life of the loan. They appear in the Adjustable Interest Rate table on page two of your Loan Estimate, and page one shows the highest payment the loan can reach.
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The arithmetic on an $800,000 loan
We ran the standard amortization formula on a hypothetical $800,000, 30-year loan, just under the $832,750 conforming line in the MBA survey, at the association’s late-September averages. The adjustment rows assume a cap structure like the one in the CFPB’s sample Loan Estimate, a first change of up to 2 points and a lifetime maximum 5 points above the start rate. Your loan’s caps may differ. This is arithmetic, not a forecast.
| Scenario | Rate | Monthly principal and interest |
|---|---|---|
| 30-year fixed | 7.30% | $5,485 |
| 5/1 ARM, years one to five | 6.47% | $5,041 |
| ARM in year six, rate unchanged | 6.47% | $5,041 |
| ARM in year six, up 2 points | 8.47% | $6,013 |
| ARM at a lifetime cap 5 points up | 11.47% | $7,593 |
In the first five years the ARM costs $444 a month less, about $26,600 over 60 payments. Its balance after five years would be about $748,600, against about $755,400 on the fixed loan. If the rate rose the full 2 points at the first change, the payment would be about $528 a month above the fixed loan, and more than $2,100 above it at a lifetime cap 5 points up. The rate could also fall, and the payment with it.
Who an ARM suits
The CFPB’s handbook suggests considering an ARM if you are confident you can afford increases in your monthly payment, even to the maximum, or if you plan to sell within a short period. A fixed rate fits buyers who prefer predictable payments or plan to stay a long time.
Most owners stay longer than five years. The typical seller in the National Association of Realtors’ 2025 profile had owned the home for 11 years, a record. A buyer who expects to stay that long is betting on a refinance, and the bureau warns against counting on one. “You might not qualify for refinancing if the value of your home goes down or if something unexpected damages your financial situation, like a job loss or medical costs,” the handbook says.
Questions to ask the lender
- How long is the initial fixed period, and how often does the rate change after it?
- Which index does the loan use, and what is the margin?
- What are the caps on the first change, each later change and the life of the loan?
- What is the highest payment shown on the Loan Estimate, and could you pay it from your income today?
- Is there a prepayment penalty if you sell or refinance early?
Ask for a fixed-rate quote and an adjustable quote from the same lender on the same day, and compare the Loan Estimates side by side. Our guide to credit scores covers the other number that sets your rate.
Sources
- Freddie Mac, Primary Mortgage Market Survey, Oct. 1, 2026
- HousingWire, Mortgage applications fall 6% as rates hit highest level in three years, Sept. 30, 2026
- Consumer Financial Protection Bureau, Consumer Handbook on Adjustable-Rate Mortgages, June 2020
- Consumer Financial Protection Bureau, For an adjustable-rate mortgage, what are the index and margin, and how do they work?, accessed Oct. 2026
- National Association of Realtors, 2025 Profile of Home Buyers and Sellers, Nov. 2025
