MW Mortgage rates soar, prompting home buyers to seek refuge in adjustable-rate loans

By Aarthi Swaminathan

The share of mortgages that were adjustable-rate rose to the highest level since November 2023, industry group says

Mortgage rates shot up over the past week, drying up home-buying and refinancing demand. But some home buyers are finding deals in adjustable-rate loans.

Mortgage rates jumped 20 basis points in one week, due to uncertainty over the future of the U.S. economy as the Trump administration continues to levy tariffs on foreign goods.

The 30-year fixed-rate mortgage rose to 6.99% as of April 11, which sapped the energy out of home buying and refinancing, according to a weekly report by the Mortgage Bankers Association, a trade-industry group.

Purchase activity, which refers to home buyers applying for mortgages to purchase a home, fell 4.9% from a week before.

Refinance activity fell 12.4% from a week prior. Refinance demand has dropped off, as home buyers find little incentive to refinance at a high interest rate.

The purchase data suggests that home buyers are highly sensitive to mortgage rates. Higher rates make it more expensive to buy a home with a mortgage. Buyers are also concerned about job security, as seen in the latest consumer-sentiment survey by Fannie Mae.

Hence "economic uncertainty and the volatility in rates is likely to make at least some prospective buyers more hesitant to move forward with a purchase," Mike Fratantoni, chief economist at the MBA, said in a statement.

Even so, some buyers were finding deals in adjustable-rate mortgages, which had relatively lower rates. The share of home buyers applying for ARMs, as they are commonly referred to, made up 9.6% of total applications, the MBA said, which was the highest since November 2023.

Looking at mortgages based on size of the loans, the MBA also found that a quarter of the application volume on a dollar basis was for ARMs, "as borrowers with larger loans are even more likely to opt" for one.

To be sure, even though ARMs may appear to be a good deal since rates are lower, they're not for everyone.

ARMs are home loans with a variable interest rate. Unlike a fixed-rate loan, ARMs start with a lower interest rate at the start for a set period, and then adjust periodically after that. The risk is that monthly payments can fluctuate over the life of the loan, as interest rates change. ARMs were also very popular during the run-up to the Great Recession, but at that point, the share of loans that were adjustable rather than fixed was far higher.

Mortgage rates soar across the board

Mortgage rates jumped across the board over the past week.

The average contract rate for a 30-year mortgage for homes sold for $806,500 or less was 6.99% for the week ending April 11. That was up 20 basis points from the previous week.

The rate for jumbo loans, or a 30-year mortgage for homes sold for over $806,500, was 6.93%, up 19 basis points from the previous week.

The average rate for a 30-year mortgage backed by the Federal Housing Administration was 6.76%, up 19 basis points from a week prior. Those loans are often used by first-time home buyers.

The average 15-year mortgage rate was up 18 basis points, to 6.27%.

The rate for five-year adjustable-rate mortgages was up 18 basis points to 6.31% from the previous week.

-Aarthi Swaminathan

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April 16, 2025 07:00 ET (11:00 GMT)

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