Rising Interest Rates Drive Demand for Riskier Mortgages
Mortgage rates continued to rise, with the average contract rate for 30-year fixed-rate mortgages reaching 6.79%, up slightly from the previous week. Despite this increase, total mortgage application volume rose by just 0.8%. The market is seeing a shift toward riskier adjustable-rate mortgages (ARMs), as their share of applications climbed to 8%—the highest in five weeks. This trend reflects borrowers seeking lower initial rates amid higher fixed-rate options. Applications for home purchases increased slightly, up 2%, but remained below the same week last year by 0.2%. In contrast, refinancing activity dropped sharply, falling 1% weekly and declining 19% compared to a year ago due to high current rates offering little incentive for refinancing. Market analysts attribute rising mortgage rates to investor concerns over inflation and global deficits. The average rate for 5/1 ARMs fell slightly to 5.94%, but these loans carry future risk as their rates can adjust upward after the initial fixed period.
Topics: ARMs (adjustable-rate mortgages) housing market mortgage rates refinancing demand