Adjustable-rate mortgage demand jumps nearly 10% as buyers struggle to afford housing market

The average 30-year fixed rate mortgages with conforming loans balances (less than $726,200) dropped to 7.86% in comparison to 7.90%.

The ARM portion of mortgage applications has reached its highest level in almost a year.

The number of mortgage applications to buy a house fell by 1% in the last week, and 22% year-over-year.

Mortgage rates are near their highest levels in more than two decades. Homebuyers have turned to riskier products for mortgages to get them into a house.

According to the Mortgage Bankers Association, last week the average 30-year fixed rate mortgages for conforming loan amounts ($726,200 and less) dropped to 7.86% (from 7.90%), while the points for loans with 20% down payments decreased from 0.77 to 0.73. This is still 80 basis point higher than it was a year ago.

Savings are available with adjustable-rate mortgages. These are riskier than fixed-rate mortgages because they are for shorter periods. Last week, the average interest rate on 5/1 ARMs dropped to 6.77%.

Joel Kan, MBA economist, said that ARM loans grew by almost 10% last week, and continue to grow in share.

The ARM portion of mortgage applications has reached its highest level in almost a year.

The overall mortgage demand continues to decline. The number of applications to refinance home loans fell by 4%, adjusted for season, during the past week. They were also 12% less than they were the previous week.

The number of mortgage applications to buy a house fell by 1% in the last week, and 22% year-over-year.

The impact of higher interest rates was felt in both the purchase and refinance market. Kan said that refinance applications had dropped to their lowest levels since January 2023 and purchase applications were at the lowest since 1995.

The markets are now waiting for the Federal Reserve to announce its decision on Wednesday. They will then know if higher interest rates can be eased.