Key takeaways 

• The average 30-year fixed mortgage was 6.24% in early November 2025, down from 6.78% a year earlier.
• Refinance applications have surged, with dollar volume up 108.8% year over year.
• Buyers grappling with high home prices and other market challenges are opting for even lower rates, at least initially, with adjustable rate mortgages. 

Refinancing is back on the table for millions of homeowners. Falling borrowing costs are prompting more people to revisit loans taken during higher-rate periods. Adjustable-rate mortgages are also gaining traction in a challenging buyer’s market, appealing to those seeking lower initial payments and more flexible loan terms.

Here’s one spot of good news in a challenging year for the housing market: lower mortgage rates are beginning to open refinancing opportunities for many borrowers, especially those who originated loans over the past two years.¹

The 30-year fixed rate mortgage averaged 6.24% as of Nov. 13, according to Freddie Mac’s latest weekly survey. A year ago at this time, the 30-year fixed-rate mortgage averaged 6.78%.²

That’s triggered mortgage finance demand, which can be more sensitive to interest rate changes than other lending.³ For the week ending Nov. 7, Fannie Mae’s refinance index showed dollar volume of applications is up 108.8% from a year ago. The application count is up nearly 70% year over year.⁴

With rates easing, more people are crunching the numbers to see if lower mortgage payments are an option. Empower research shows that 20% of mortgage holders have an interest rate at 5% or higher.

Those who took out loans over the past two years stand to gain the most, according to a new report from ICE Mortgage Technology. About 4.1 million mortgage holders could save at least 75 basis points (0.75%) by refinancing at prevailing mortgage rates. That pool would expand to 5 million borrowers if rates ease to 6.125%.⁵

The average size loan of a refinance application was $393,900 in late October, according to the Mortgage Bankers Association, as borrowers with larger loans continued to seek ways to lower their monthly payments.⁶

Read more: Refinancing a mortgage

Adjustable rate loans are also back — but different 

Those buying homes are also looking at ways to keep monthly payments in check. Some are turning to adjustable-rate mortgages (ARMs), which have accounted for upwards of 10% of all mortgage applications in some recent weeks — the highest levels in several years.⁷

ARMs offer lower initial rates than fixed-rate mortgages — but typically reset after introductory periods of 3 to 10 years. The average initial rate on a five-year ARM was 5.56% in the week ending Oct. 31, according to the Mortgage Bankers Association.⁸

On a $400,000 loan, the initial discount on a 5/1 ARM in the mid-5% range could translate to roughly $200 in monthly savings compared with a 30-year fixed rate around 6.3%, according to one estimate^.9

ARM borrowers are hoping that mortgage rates will fall and allow them to refinance before the initial rate expires.  In addition to higher rates, borrowers run the risk of not qualifying for a refinance if they have a job loss or other changes to their financial status.¹⁰

ARMs today are different from earlier types of adjustable rate loans associated with the 2008 housing and financial crisis. They’re mostly reserved for borrowers with good credit, higher down payments, and lower debt-to-income ratios.¹¹

ARMs also have tougher lender requirements and borrower protections than they did15 years ago — including caps on how much rates can adjust after the introductory period ends. Adjustments often happen in six-month or one-year intervals, rather than monthly.¹²

Read more: Mortgage rates and the housing market

Why ARMs are seeing a comeback 

The uptick in adjustable-rate loans suggests borrowers are searching for an edge in a housing market still constrained by elevated rates and near record-high prices — up more than 50% since 2019. Related costs such as home insurance and property taxes have also been on the rise.¹³

For many, the initial lower payment is seen as a potential bridge until rates might drop and they can refinance. Others are less concerned about rate resets; they might be planning to sell or pay off the loans before the adjustable period would kick in.¹⁴

It isn’t just home buyers; the share of existing borrowers looking to refinance into ARMs has also been on the rise.¹⁵

Risks remain regardless of life plans and situations. In addition to the risk of paying higher rates down the line, an unexpected change to a borrower’s job or financial status — or a change of plans to sell and relocate — could have a person keeping an ARM longer than initially planned.¹⁶   

Know and compare ARM terms before borrowing 

Potential borrowers should make sure they know the difference between ARMs and fixed rate mortgages before they choose a loan. While ARMs have more safeguards than they did in the past, they’re generally more complex than other mortgages and require more attention.¹⁷

There are many types of ARM structures. For instance, a 5/6 ARM offers a fixed rate for the first five years before adjusting every six months, while a 10/1 ARM stays fixed for ten years, then resets annually. After the fixed period ends, the rate adjusts based on a market index plus a set margin. The Secured Overnight Financing Rate (SOFR) is the most common benchmark, though some lenders use others.¹⁸

ARMs also can include several types of rate caps — initial, periodic, and lifetime — which limit how much the interest rate can rise. Those and other features make comparison shopping especially important.¹⁹

Borrowers should not only compare different ARM options but also weigh them against fixed-rate loans and other tools such as discount points or temporary mortgage buydowns offered by home builders or other sellers.

An ARM can be a short-term strategy for borrowers seeking a lower initial rate while waiting for the chance to refinance if rates fall. But potential flexibility also might mean giving up some predictability on interest rates.

Read more: Mortgage buydown: What it is and how it works