More Borrowers Are Turning to ARMs as Rates Stay Elevated

• September 2nd

by UrbanTurf Staff

✉️ Want to forward this article? Click here.

Mortgage applications ticked up last week and there was a notable shift is in how borrowers are financing their purchases.

With the 30-year fixed rate holding near 6.79% — its highest level in four weeks — the share of applications for adjustable-rate mortgages (ARM) climbed to 8%, the biggest ARM share recorded in five weeks, according to the Mortgage Bankers Association. 

"Mortgage rates reached their highest levels in four weeks as investors' concerns about inflation and growing deficits push yields higher across the globe," said Mike Fratantoni, MBA's SVP and Chief Economist. "Refinance volume dropped in response, but purchase volume increased modestly over the week and was slightly below last year's level. In many local markets, potential buyers have plenty of homes to choose, and this is likely supporting transaction volume. Another trend we're monitoring is more borrowers choosing ARMs."

The pivot toward ARMs tracks with a broader pattern this year: as 30-year rates stay stuck well above 6.5%, buyers are increasingly willing to trade rate certainty for a lower monthly payment up front, even with the built-in risk of a rate reset down the line.

This article originally published at https://dc.urbanturf.com/articles/blog/more_borrowers_are_turning_to_arms_as_rates_stay_elevated/24959.