Rising rates push more homebuyers to riskier adjustable-rate mortgages
Mortgage rates climbed in the first week of October,
with the 30-year conforming rate reaching 6.81%,
the Mortgage Bankers association reported Wednesday.
Alexis C. Glenn/UPI | License Photo
Oct. 12 (UPI) -- Mortgage applications dropped last week as interest rates continued to climb, pushing more homebuyers toward risky adjustable-rate mortgages.
Mortgage application volume for the week ending Friday fell 2% from the prior week, the Mortgage Bankers Association reported Wednesday.
"Mortgage rates moved higher once again during the first week of the fourth quarter of 2022, with the 30-year conforming rate reaching 6.81 percent, the highest level since 2006," Mike Fratantoni, MBA's senior vice president and chief economist, said in a news release. Last week's 30-year-conforming rate was 6.75%.
All mortgage types saw rate increases, with five-year adjustable-rate loans seeing the biggest hike at 20 basis points to 5.56%. ARMs made up 11.7% of all mortgages, up from about 3% early in the year, CNBC noted.
Oct. 12 (UPI) -- Mortgage applications dropped last week as interest rates continued to climb, pushing more homebuyers toward risky adjustable-rate mortgages.
Mortgage application volume for the week ending Friday fell 2% from the prior week, the Mortgage Bankers Association reported Wednesday.
"Mortgage rates moved higher once again during the first week of the fourth quarter of 2022, with the 30-year conforming rate reaching 6.81 percent, the highest level since 2006," Mike Fratantoni, MBA's senior vice president and chief economist, said in a news release. Last week's 30-year-conforming rate was 6.75%.
All mortgage types saw rate increases, with five-year adjustable-rate loans seeing the biggest hike at 20 basis points to 5.56%. ARMs made up 11.7% of all mortgages, up from about 3% early in the year, CNBC noted.
ARMs are considered riskier because they start out at a lower rate for a period of time, but eventually adjust to market rate, which can lead to higher monthly mortgage bills if rates increase.
The volume of applications fell for purchases and refinancing, with refinancing holding its 29% share of mortgage activity. Applications for purchases were 39% below a year ago.
"The news that job growth and wage growth continued in September is positive for the housing market, as higher incomes support housing demand," Fratantoni said. "However, it also pushed off the possibility of any near-term pivot from the federal Reserve on its plans for additional rate hikes."
U.S. employers added 263,000 hires in September, the Labor Department reported Friday.
Mortgage rates have more than doubled since the Fed began raising its benchmark federal funds rate to fight inflation.
Loans insured by the Federal Housing Administration made up 13.5% of all mortgages, up from 13.2% the week before. Veterans Affairs-backed loans increased to 10.9% of all applications, up from 10.7%, while USDA loans fell to 0.5% from 0.6%.
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