MW Home buyers turn to adjustable-rate mortgages as 30-year rate zooms past 7%
By Aarthi Swaminathan
Mortgage rates jump to highest level since November 2023
The numbers: Mortgage rates rose for the third week in a row, moving beyond 7%, prompting some home buyers to seek refuge in adjustable-rate mortgages.
The 30-year mortgage rate was at the highest level since November 2023, while the rate for the 5/1 ARM, which is fixed for the first five years and adjusts every year thereafter, was still below 7%.
Overall, elevated rates prompted most buyers to hit the brakes on buying homes, which pushed the market composite index - a measure of mortgage application volume - down in the last week, according to the Mortgage Bankers Association (MBA) on Wednesday.
The market index fell 2.7% to 196.7 for the week ending April 19 from a week ago. A year ago, the index stood at 216.9.
Key details: The purchase index - which measures mortgage applications for the purchase of a home - fell 1% from a week ago.
The refinance index fell 5.6%.
On the other hand, the adjustable-rate mortgage index rose 2.1% from the previous week and formed 7.6% of total applications.
The average contract rate for the 30-year mortgage for homes sold for $766,550 or less was 7.24% for the week ending April 19. That's up from 7.13% from the week before.
The rate for jumbo loans, or the 30-year mortgage for homes sold for over $766,550, was 7.45%, up from 7.4% a week ago.
The average rate for a 30-year mortgage backed by the Federal Housing Administration was 7.01%, up from 6.9% a week ago.
The 15-year was up to 6.75% from 6.64% from the previous week.
The rate for adjustable-rate mortgages was up to 6.64%, from 6.52% last week.
The big picture: The housing market is again back in the doldrums as mortgage rates march past 7%, which is likely to dampen home-buying activity in the coming months.
Higher rates mean buyers are more reluctant to purchase homes as borrowing costs soar. Higher rates also discourage homeowners from selling their homes - possibly giving up mortgage rates that could be half of where they are today or forcing them into a high mortgage rate - prolonging the shortage of property listings.
What the MBA said: "Purchase applications declined, as home buyers delayed their purchase decisions due to strained affordability and low supply," Joel Kan, vice president and deputy chief economist at the MBA, said in a statement.
"The ARM share of applications increased ... [which is] consistent with the upward trend in rates, as buyers look to reduce their potential monthly payments," he added.
-Aarthi Swaminathan
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(END) Dow Jones Newswires
April 24, 2024 07:00 ET (11:00 GMT)
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