Mortgage Rates Rise Over 7%, Pushing Borrowers Toward Adjustable-Rate Loans
Last week, mortgage rates climbed to their highest level since early 2024, with the average contract rate for a 30-year fixed-rate conforming loan reaching 7.12%. This increase led to a drop in total application volume by 1.5% compared to the previous week and pushed more borrowers toward adjustable-rate mortgages (ARMs), which now accounted for 9.8% of applications, up from 8.4% the prior week. Refinancing activity fell sharply, declining 3% weekly and dropping 62% year-over-year—the lowest level since February 2025. Home purchase applications also declined slightly by 1%, with a larger annual drop of 11%. The housing market is experiencing a slowdown as higher rates deter buyers and homeowners seek savings through riskier loan options. Mike Fratantoni, MBA's chief economist, noted that ARMs are becoming more attractive due to their lower initial rates compared to fixed-rate loans. However, these loans carry the risk of rate adjustments after an introductory period.
Topics: ARMs home purchases mortgage rates refinancing