Demand for riskier mortgages rises again, along with interest rates

Demand for riskier mortgages rises again, along with interest rates Skip Navigation Markets Business Investing Tech Politics & Policy Video Watchlist Investing Club PRO Livestream Menu Key Points The ARM share of total mortgage application rose to 8.5% The average contract interest rate last week for 30-year fixed-rate mortgages with conforming loan balances increased to 6.85% from 6.79% The average rate for a 5-year ARM fell to 5.82% from 5.94%. A "For Sale" sign outside of a home in Marana, Arizona, US, on Wednesday, Aug. 5, 2026. Rebecca Noble | Bloomberg | Getty Images Mortgage rates moved up again last week, prompting more borrowers to search for savings. They found that in riskier, adjustable-rate mortgages (ARMs). Demand for those loans made up 8.5% of all mortgage applications last week, up from 8% the previous week, according to the Mortgage Bankers Association, and the highest level since June. In the first years of the pandemic, when mortgage rates fell to historic lows, demand for ARMs was barely 3%. ARMs offer lower rates and can be fixed for up to 10 years. As a comparison, the average contract interest rate last week for 30-year fixed-rate mortgages with conforming loan balances, $832,750 or less, increased to 6.85% from 6.79% the previous week, with points increasing to 0.67 from 0.65, including the origination fee, for loans with a 20% down payment. The average rate for a 5-year ARM fell to 5.82% from 5.94%. Higher rates on the 30-year fixed caused total mortgage demand to drop again. Total application volume dropped 2.7% for the week, according to the MBA's seasonally adjusted index. "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," said Joel Kan, MBA's vice president and deputy chief economist. Applications to refinance a home loan fell hardest, down 6% for the week and 25% lower than the same week one year ago. That is the slowest pace since May 2025. Get Property Play directly to your inbox CNBC's Property Play with Diana Olick covers new and evolving opportunities for the real estate investor, delivered weekly to your inbox. Subscribe here to get access today . Applications for a mortgage to purchase a home were essentially flat, down 0.2% for the week. They were 4% higher than the same week one year ago. "Higher mortgage rates continue to weigh on prospective homebuyers looking to act, even as housing inventory has increased in many markets," Kan added. Mortgage rates were unchanged to start this week, according to a separate survey from Mortgage News Daily. Investors are waiting for monthly inflation numbers set to be released at the end of this week. Those could move mortgage rates sharply in either direction, depending on the outcome. Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.