Why More Borrowers Are Kicking the Tires on ARMs

When fixed rates climb, shoppers go hunting for relief. Last week they found it in adjustable-rate mortgages/). ARMs accounted for 8.5% of all applications, up from 8% the prior week per the Mortgage Bankers Association, the highest share since June.

For context, early in the pandemic when rates hit record lows, ARM interest was around 3%. ARMs generally start cheaper and can stay fixed for as long as 10 years, which explains the renewed attention. The average rate on a five year ARM eased to 5.82% from 5.94%.

What the Weekly Data Shows

The MBA reported the average contract rate on 30 year fixed mortgages with conforming balances of $832,750 or less rose to 6.85% from 6.79% a week earlier. For borrowers putting 20% down, average points, including the origination fee, ticked up to 0.67 from 0.65. Higher fixed rates weighed on activity overall, with seasonally adjusted total applications down 2.7% week over week.

Refinance applications fell 6% for the week and were 25% below the comparable week last year. That marked the slowest pace recorded since May 2025. Purchase applications were essentially unchanged, slipping 0.2% for the week, and stood 4% above the same week a year ago.

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What Is Driving Rates And What To Watch

Joel Kan, the MBA's vice president and deputy chief economist, said, "Mortgage rates moved higher last week, driven by ongoing investor concerns over inflation and the federal budget deficit. The 30-year fixed rate increased to 6.85 percent, the highest since June 2025 and 36 basis points higher than a year ago." He added, "Higher mortgage rates continue to weigh on prospective homebuyers looking to act, even as housing inventory has increased in many markets." Mortgage News Daily's separate survey showed rates holding steady to start this week. Investors are now waiting for monthly inflation data due at week's end, which could swing mortgage rates in either direction.

What It Means For Your Wallet

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