- The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 7.86% from 7.90%.
- The ARM share of mortgage applications is now at the highest level in nearly a year.
- Applications for a mortgage to purchase a home fell 1% for the week and were 22% lower year over year.
A house is for sale in Arlington, Virginia, July 13, 2023.
Saul Loeb | AFP | Getty Images
As mortgage rates reach record highs, homebuyers are exploring riskier mortgage products to facilitate their home purchases.
Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 7.86% from 7.90%, with points decreasing to 0.73 from 0.77 (including the origination fee) for loans with a 20% down payment, according to the Mortgage Bankers Association. However, this rate is still 80 basis points higher than the same week one year ago.
Adjustable-rate mortgages, which are considered riskier due to their fixed terms, provide savings. The average contract interest rate for 5/1 ARMs decreased to 6.77% last week.
“As higher rates continue to impact affordability and purchasing power, ARM loans increased by nearly 10% last week and gained share, reaching 10.7% of all applications,” said Joel Kan, an economist at the Mortgage Bankers Association.
The ARM share of mortgage applications is now at its highest level in nearly a year.
Overall, mortgage demand continues to decline. Applications to refinance a home loan fell 4% for the week and were 12% lower than the same week one year ago.
Applications for a mortgage to purchase a home fell 1% for the week and were 22% lower year over year.
“The impact of higher rates continued to be felt across both purchase and refinance markets. Purchase applications decreased to their lowest level since 1995, and refinance applications fell to the lowest level since January 2023,” added Kan.
Markets are now eagerly waiting for news from the Federal Reserve on Wednesday to see if there will be any relief from higher interest rates.
