Borrowers Turn to Adjustable-Rate Mortgages as Fixed Rates Hit 7% Amid Declining Loan Applications

Mortgage applications slipped 1.5% week over week, according to the Mortgage Bankers Association's seasonally adjusted index, as the average contract rate for 30-year fixed-rate mortgages on conforming loans rose to 7.12% from 6.97%. Points on these loans increased slightly to 0.73 from 0.72, including the origination fee for borrowers putting down 20%.

Refinance applications dropped 3% for the week and were 62% lower than a year earlier, marking the lowest level since February 2025. Purchase-loan applications fell 1% and were 11% down year over year, reflecting a slowdown in the housing market that typically peaks in spring.

"With fixed rates much higher, more borrowers opted for ARMs, with the ARM share reaching 9.8%, as rates for 5/1 ARMs were more than a percentage point lower than those for fixed rate loans," said Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association.

The share of adjustable-rate mortgage (ARM) applications rose from 8.4% the previous week and remains well above the roughly 3% share seen early in the pandemic when rates were at historic lows. ARMs typically lock in a fixed rate for up to ten years before adjusting based on market conditions.

A separate survey from Mortgage News Daily indicated that mortgage rates edged lower at the start of the following week as oil prices fell and bond yields declined.