Demand for riskier adjustable-rate mortgages hits highest level of the year, due to rising rates

The share of ARM applications rose to 7.8% of mortgage demand last week, according to the Mortgage Bankers Association.

When mortgage rates hit record lows back in 2021, the ARM share of applications was in the 3% range. "Inflation remains stubbornly high, and this trend is convincing markets that rates, including mortgage rates, are going to stay higher for longer. No doubt, this is a headwind for the housing and mortgage markets, with the 30-year fixed mortgage rate increasing to 7.29 percent last week, the highest level since November 2023," said Mike Fratantoni, MBA's SVP and chief economist.

Applications to refinance a home loan fell 3% for the week and were 1% lower than the same week one year ago. With rates 79 basis points higher than a year ago, homeowners have little incentive to refinance. Those wanting to take out home equity are more likely to do that through a second loan or line of credit, rather than give up their current low rate.

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