- Mortgage rates are up to 6.81%, a very high point in more than ten years.
- Applications for ARMs went up 15% in one week. This shows people are moving toward options with rates that can change.
- Overall mortgage applications are a little higher, up 0.1%, even though interest rates are higher.
- In Las Vegas, buyers like ARMs for quick flexibility in a housing market that changes fast.
- ARMs can be very risky if you have them past the starting period with a fixed rate, especially if markets are unstable.
Mortgage rates are way up in 2025. Because of this, many people who want to buy homes or invest are thinking again about loans with fixed rates. They are now looking at adjustable-rate mortgages (ARMs). These loans start with a lower rate, which can help with money issues at first. However, they are risky. Inflation, unstable world economies, and changes in bond yields are making markets unsure. ARMs are coming back as something homebuyers might use. But are they worth the risk in today’s fast and risky housing market?
Why Mortgage Rates Are Going Up in 2025
Mortgage rates have gone up a lot because of different things happening in the US and around the world. The main reason is inflation. It has stayed high because supply chains around the world are still messed up. Trade problems and higher taxes on imports have made this worse. The US is still having trouble making trade deals, especially for energy, tech, and farm goods. This is making prices for shoppers higher, and stopping inflation is now a main goal for leaders.
To fight inflation, the Federal Reserve is keeping interest rates high. The idea is to make people spend less and slow down the economy. But this also makes it cost more to borrow money, including for mortgages.
Mortgage rates move with how bonds are doing, especially the 10-year Treasury note yields. When investors think inflation will be higher or the economy will grow less, they sell bonds. This makes yields go up. Then, mortgage lenders raise rates to match the higher cost to borrow money.
So, the average rate for a 30-year fixed mortgage is now 6.81% in April 2025, according to Freddie Mac. This is almost the highest it has been in over ten years. It’s making many people who might buy homes rethink what kind of mortgage is best for them.
What are Adjustable-Rate Mortgages (ARMs)?
An adjustable-rate mortgage (ARM) is a home loan where the interest rate changes sometimes after a starting period with a fixed rate. This is different from a regular fixed-rate mortgage, where the rate stays the same for the whole loan.
How ARMs Work
ARMs are usually set up as hybrid loans. For example, a 5/1 ARM starts with a low, set interest rate for the first five years. After that, the rate changes once a year. It’s based on an index (like SOFR—Secured Overnight Financing Rate—or the Constant Maturity Treasury or CMT) plus an extra amount the lender adds.
After the fixed period, your new interest rate could go up or down based on what’s happening in the market. Some ARMs have limits on how much the rate—and your monthly payment—can go up each year or over the whole loan. But even with these limits, borrowers still take on risk.
Good Things About ARMs
- Savings at First: ARMs usually have lower interest rates than fixed-rate mortgages at the start. This means lower monthly payments. It can help buyers afford more expensive homes or just save money on interest early on.
- Easier to Afford: Lower monthly payments can make your debt-to-income (DTI) ratio look better. This can make it easier to get approved for a loan.
- Good for Short-Term Plans: If you plan to move, refinance, or pay off the loan before the rate changes, an ARM can save you money.
Bad Things About ARMs
- Rates Can Change: After the starting period, the interest rate is linked to the market. This means it could go up a lot.
- Costs Can Change: It can be hard to plan your budget when you don’t know what your payments will be later. A big rate increase could make your money tight.
- Risk Over Time: If you stay in the home past the starting period and don’t refinance or sell, you might end up paying much more than with a fixed-rate mortgage.
More People Want ARMs Now
Mortgage rates are almost the highest they’ve been in ten years in 2025. Because of this, more people are using ARMs. The Mortgage Bankers Association said that applications for adjustable-rate mortgages jumped 15% in just one week. This clearly shows that buyers are finding new ways to make things work.
This change comes from practical choices. Many borrowers think they will sell, move, or get a new loan before the rate changes on their ARM. They want to take advantage of the lower cost at the beginning of an ARM without dealing with the risks later.
In housing markets where homes are expensive or it’s hard to buy, ARMs help buyers on a budget. They can buy in areas they like or get the home features they want while staying in their price range. It’s like “loan surfing”—riding the low rate for a bit and then switching to something better later.
Possible Dangers of Adjustable-Rate Mortgages
Even though ARMs are getting more popular, it’s important to know the risks.
Payment Shock
The biggest risk is “payment shock.” This is when your monthly payment suddenly goes up a lot after the starting period. Inflation and high rates are already making money tight for people. An unexpected jump in housing costs could make it hard for homeowners to pay, and they could even lose their home.
Market Timing Risks
Hoping to refinance later depends on interest rates being good and your home being worth enough. If the market gets worse or home values don’t grow or even fall, you might not be able to refinance. Then, ARM holders could be stuck with high payments.
Unstable Economy
The bond market is changing, and the Federal Reserve is keeping rates high. This means the economy could become more unstable. Things happening around the world—like wars or market problems—can push index rates up. This then makes ARM interest rates higher.
Money Uncertainty
For people with set incomes or not much savings, ARMs might save money now. But they also greatly increase risk for the future. This is especially worrying when the economy is unsure.
Mortgage Demand Still Strong Even With Changes
It’s surprising that high mortgage rates have not stopped buyers from being in the market. The Mortgage Bankers Association said that total mortgage applications went up by 0.1% in a recent week. This shows that homebuyers are still active.
This shows that today’s home shoppers can adjust. Buyers are not leaving—they are changing their plans. This includes:
- Choosing ARMs instead of fixed-rate mortgages to keep costs down.
- Putting more money down to lower monthly payments.
- Looking at loans backed by the government, like FHA and VA loans. These often have better terms for those who qualify.
Even with a complex economy, new ways of financing are keeping the market going—even if slowly.
The Las Vegas Housing Market in 2025
Las Vegas is a good example of what’s happening in housing across the US. It’s known for its ups and downs, and it’s still a housing market that people watch closely.
Market Overview
In 2025, there are fewer homes for sale compared to the last two years. Homes are not selling as fast as during the pandemic, but demand is still strong in good areas. This is especially true for homes that are updated or newly built. Home prices are still going up a bit, but not as fast as before. This helps sellers, but also makes buyers feel a bit better.
Expert Opinion: Steve Hawks
Steve Hawks is a Realtor who is in the top 1% in the country. He says that buyers are reacting to the changing mortgage rates in smart ways. He tells his clients to really think about their money plans for the future.
In fast markets like Las Vegas, where people often own homes for less than 10 years, ARMs are becoming more popular.
“Buyers know more now,” Hawks says. “They know they don’t have to get a 30-year loan if they won’t be in the house for that long.”
Hawks also says that because there aren’t many homes for sale locally, waiting to buy for better rates might not work. “You might save on interest later, but pay more for the house,” he warns.
Adjustable-Rate Mortgages for Investors in Las Vegas Real Estate
For real estate investors—especially in a busy market like Las Vegas—ARMs can be very useful.
Short-Term Investors
Investors who flip houses or rent out homes for short periods might like ARMs. This is because of the lower monthly payments during the interest-only or fixed period.
Lower costs at the beginning mean better returns on investment (ROI) quickly. This is especially true in Las Vegas tourist areas, where income from vacation rentals can change.
Long-Term Investors
For investors who buy and hold properties for a long time, ARMs are much riskier. Unless there’s a good reason to think rates will go down (or stay low), having an ARM for 10 to 15 years can greatly increase the total interest paid. For these investors, a fixed-rate mortgage that is predictable is often worth the higher cost at first.
Who Should Think About an ARM?
Adjustable-rate mortgages are not right for everyone. But some borrowers might benefit from these loans if they use them carefully.
ARMs Might Be Good For You If:
- You’ll Own Short-Term: Planning to stay in the home for only a few years? An ARM could be good.
- You Have High Income: If you have extra money, you can handle rates going up.
- You Expect Income to Grow: Thinking your income will increase a lot? You might be able to handle higher payments later.
- You Think You Can Refinance Later: If you think rates will drop or your credit will get better, an ARM can be a temporary solution.
ARMs Are Not Good For You If:
- You’re on a Tight Budget: If money is tight, risking payment increases is dangerous.
- You’ll Own Long-Term: The longer you have the home, the more you benefit from fixed payments that don’t change.
- You Don’t Like Risk: If unsure finances make you worried, an ARM will add stress.
Good Alternatives to ARMs Now
If ARMs seem too risky, you don’t have to just accept high monthly payments. There are other ways to finance that can help without risking rates that change.
2-1 Buydown Programs
These programs let sellers (or builders) pay to lower your mortgage rate for a while. In year one, the rate is lower. In year two, it’s closer to the market rate. By year three, the full rate starts. This gives you set payments and savings at the start.
Bigger Down Payments
More down payment means smaller loans and lower monthly payments. If you can pay more upfront—even with help or gifts—you might not need an ARM.
FHA and VA Loans
If you qualify, government-backed loans offer good fixed rates. They also have easier credit rules and lower down payment needs.
Tips from Top Las Vegas Agent Steve Hawks
Steve Hawks says choosing a mortgage is not simple, especially not in 2025.
“In a year where rates could change a lot in just weeks,” he says, “it’s really important to work with someone local who can help you lock in a rate at the right time and give you advice on how to set up your loan.”
He tells buyers to:
- Get rate quotes from different lenders
- Compare ARMs and fixed-rate options directly
- Think about how long you’ll be in the home
- Focus on what you can really afford overall, not just the monthly payment
Most importantly, Hawks suggests making a financial plan for the next five and ten years before choosing any loan.
Is an ARM Right for You in 2025?
In 2025, ARMs are both attractive and complicated. With interest rates around 6.81% and the economy still unsure, ARMs can help lower costs at first.
But they do have risks. To choose an ARM wisely, it needs to fit your life plans, your budget, and your ability to handle payment changes.
For many people in Las Vegas, ARMs are a step, not the final goal. If used carefully and with a plan to refinance or sell later, they can be helpful. For others, they could turn today’s dream home into money problems later.
Get advice from experts like Steve Hawks and think about all your choices before you decide.
Citations
- Freddie Mac. (2025). Primary Mortgage Market Survey. 30-year fixed mortgage rate averaged 6.81%.
- Mortgage Bankers Association. (2025). Weekly Mortgage Applications Survey. ARM applications rose 15% week-over-week; total mortgage applications rose 0.1%.