MBA: Demand for adjustable-rate mortgages has reached a 14-year high. At the beginning of the year, ARMs made up 3% of all loans; now it’s 11%.
NEW YORK – As mortgage rates rapidly rise, some buyers get priced out unless they lock in an adjustable-rate mortgage (ARM), which may have an introductory rate today that’s closer to the level of fixed-rate mortgages they enjoyed when they started their house hunt. Depending on the specific ARM they select, that rate then “adjusts” to a new level in five seven or 10 years.
The average contract interest rate for a 30-year fixed-rate mortgage rose to 5.53% last week. The rate on a 5-year ARM, in comparison, was 4.47%, according to the Mortgage Bankers Association.
The demand for adjustable-rate mortgages has reached a 14-year high. At the beginning of the year when mortgage rates were still near record lows, the share of mortgages with adjustable rates was just 3% of all purchase applications. Now, the share of ARMs rose to 11% of overall mortgage loans, MBA reports.
“More borrowers continue to utilize ARMs to combat higher rates,” says Joel Kan, an MBA economist.
Even as home prices and rates climb, mortgage demand has remained resilient. Mortgage applications to purchase a home increased 5% last week compared to the previous week.
“Despite a slow start to this year’s spring homebuying season, prospective buyers are showing some resiliency to higher rates,” Kan says. “Purchase activity has now increased for two straight weeks.”
Source: “Adjustable-Rate Mortgage Demand Surges to 14-Year High, as Homebuyers Try to Afford This Pricey Spring Market,” CNBC (May 11, 2022)
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Read the Original Article Here: As Rates Go Up, Buyers “Adjust,’ Opting for ARMs