Mortgage rates for 30-year fixed-rate mortgages have dropped to their lowest point since early May, but this hasn’t translated into a surge in mortgage applications. Homebuyers appear to be waiting for more clarity on the Federal Reserve’s future policy direction.
Results for: mortgage applications
As mortgage rates climb, homebuyers are increasingly turning to adjustable-rate mortgages (ARMs) to minimize their monthly payments. These loans, which offer lower interest rates than fixed-rate options, have been gradually gaining market share, reaching 7.8% of mortgage demand last week, the highest level of the year. The average contract interest rate for ARMs has also declined, standing at 6.60%. Experts attribute this trend to stubbornly high inflation, which is pushing mortgage rates higher. Despite the resurgence of ARMs, overall mortgage demand has decreased, with applications for refinancing and home equity loans also falling. Meanwhile, applications from potential homebuyers have dropped by 14% year-over-year.
Adjustable-rate mortgage applications witnessed a 7.6% surge, indicating buyers’ efforts to secure lower borrowing costs amidst rising mortgage rates. However, ARM loans come with their inherent risks, as interest rates can fluctuate after an initial fixed period.