ARM MORTGAGES RISE TO HIGHEST LEVEL SINCE JUNE AS RATES CLIMB

Demand for adjustable-rate mortgages reached 8.5% of all mortgage applications last week, up from 8% the previous week, according to the Mortgage Bankers Association. This represents the highest share since June. The shift came as average contract interest rates for 30-year fixed-rate mortgages increased to 6.85% from 6.79%, with points rising to 0.67 from 0.65 for loans with a 20% down payment. The average rate for five-year ARMs fell to 5.82% from 5.94%, making them increasingly attractive to borrowers seeking lower initial payments.

Adjustable-rate mortgages offer lower rates than fixed mortgages and can remain fixed for up to 10 years before rates adjust. Demand for these loans has grown substantially since the pandemic, when historic lows made ARMs unnecessary; ARM applications represented barely 3% of total applications during that period. Total mortgage application volume declined 2.7% for the week on a seasonally adjusted basis, driven by the higher rates on 30-year fixed mortgages. Applications to refinance fell 6% for the week and 25% compared to the same week one year ago, the slowest pace since May 2025.

Joel Kan, vice president and deputy chief economist at the Mortgage Bankers Association, attributed the rate increases to ongoing investor concerns over inflation and the federal budget deficit. Applications for mortgages to purchase a home were essentially flat, declining 0.2% for the week, though they remained 4% higher than the same week one year ago. The 30-year fixed rate of 6.85% is the highest since June 2025 and 36 basis points higher than a year prior.