Mortgage rates moved higher again last week, and that pushed more borrowers toward a riskier loan product: adjustable-rate mortgages. Demand for ARMs climbed to 8.5% of all mortgage applications, up from 8% the prior week, according to the Mortgage Bankers Association. That is the highest share since June. During the early pandemic years, when rates hit historic lows, ARM demand barely topped 3%.
The average contract interest rate on the popular 30-year fixed-rate mortgage with conforming loan balances — those at or below $832,750 — increased to 6.85% from 6.79% the prior week, MBA data showed. That is the highest level since June 2025 and 36 basis points higher than a year ago. Points also rose, to 0.67 from 0.65, including the origination fee, for loans with a 20% down payment.
In contrast, the average rate on a 5-year ARM fell to 5.82% from 5.94%, making the adjustable product more attractive for borrowers searching for savings.
ARM share rises as fixed-rate costs climb
ARMs offer lower initial rates and can remain fixed for up to 10 years, but they carry the risk of resetting higher later. With the 30-year fixed rate climbing, more borrowers have been willing to take on that risk. The increase in ARM demand comes as investors continue to worry about inflation and the federal budget deficit, which are putting upward pressure on longer-term yields.
“Mortgage rates moved higher last week, driven by ongoing investor concerns over inflation and the federal budget deficit,” said Joel Kan, MBA’s vice president and deputy chief economist.
The jump in rates weighed on overall mortgage demand. Total application volume dropped 2.7% for the week, according to the MBA’s seasonally adjusted index.
Refinances slump, purchases hold steady
Refinance applications took the biggest hit, falling 6% for the week and sitting 25% lower than the same week a year ago. That marks the slowest pace since May 2025. Purchase applications were essentially flat, down just 0.2% for the week, but they were 4% higher than the same week one year ago.
“Higher mortgage rates continue to weigh on prospective homebuyers looking to act, even as housing inventory has increased in many markets,” Kan added.
Looking ahead, mortgage rates were unchanged at the start of this week, according to a separate survey from Mortgage News Daily. Investors are waiting for monthly inflation numbers due at the end of the week, which could move rates sharply in either direction depending on the outcome.
Source: www.cnbc.com — https://www.cnbc.com/2026/09/09/demand-for-riskier-mortgages-rises-again-along-with-interest-rates.html
This article is for informational purposes only and does not constitute financial, investment, tax, or legal advice. Do your own research and consult a licensed professional before making financial decisions.
