- The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) fell from 7.90% to 7.86%.
- The ARM share of mortgage applications is now at its highest level in nearly a year.
- Mortgage applications to purchase a home fell 1% for the week and were 22% lower year-over-year.
A home is for sale in Arlington, Virginia on July 13, 2023.
Saul Loeb | AFP | Getty Images
With mortgage rates hovering at their highest levels in more than two decades, homebuyers are turning to riskier mortgage products to make it easier to get into homeownership.
Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) fell from 7.90% to 7.86%, with points for loans with a falling to 0.73 from 0.77 (including the origination fee ) dropped 20% down payment according to Mortgage Bankers Association. That’s still 80 basis points more than the same week a year ago.
Variable rate mortgages, considered riskier because interest rates are fixed for shorter terms, offer savings. The average contract interest rate for 5/1 ARMs fell to 6.77% last week.
“As higher interest rates continue to impact affordability and purchasing power, ARM loans rose nearly 10 percent last week and continued to gain share, rising to 10.7 percent of all applications,” said Joel Kan, an MBA economist .
The ARM share of mortgage applications is now at its highest level in nearly a year.
Overall, however, mortgage demand continues to fall. Applications to refinance a home loan fell 4% on a seasonally adjusted basis for the week and were 12% lower than the same week a year ago.
Mortgage applications to purchase a home fell 1% for the week and were 22% lower year-over-year.
“The impact of higher interest rates continued to be felt in both the purchase and refinance markets. Purchase applications fell to their lowest level since 1995 and refinance applications fell to their lowest level since January 2023,” Kan added.
Markets are now waiting for news from the Federal Reserve on Wednesday to see if higher interest rates will provide relief.