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mortgage demand was largely unchanged last week as borrowers pulled back from adjustable-rate mortgages, or ARMs, while elevated housing costs continued to weigh on buying activity, according to weekly data released Wednesday by the Mortgage Bankers Association.
An ARM, or adjustable-rate mortgage, typically offers a lower initial interest rate than a fixed-rate mortgage but resets to market rates after a set period, making it riskier if borrowing costs rise.
Total mortgage application volume increased just 0.04% week over week on a seasonally adjusted basis, signaling a largely stagnant lending environment.
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Think Your 'Safe' Stocks Protect You? You're Ignoring the Real Growth Triggers —Here's What to Add Now The average contract rate for a 30-year fixed mortgage with conforming balances of $832,750 or less edged down to 6.57% from 6.59%.
Meanwhile, the average rate for a 5-year ARM rose to 5.79% from 5.68%, narrowing the rate advantage ARMs typically offer.
ARM loans accounted for just 7.6% of total applications, the lowest share since January and down from 9.6% in mid-May.
Joel Kan, vice president and deputy chief economist at the Mortgage Bankers Association, said mortgage rates eased slightly as oil prices declined, helping support modest application activity.
Applications to refinance fell 1% from the prior week but remained 9% higher than the same week a year ago.
Purchase applications rose 1% week over week and were 3% higher year over year.
The declining appeal of ARMs suggests borrowers are increasingly unwilling to take additional rate-reset risk for relatively limited upfront savings.
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