Demand for riskier mortgages rises along with interest rates
Mortgage application volume remains stagnant as interest rates continue to climb, leading more borrowers to choose riskier adjustable-rate mortgages. Despite a slight increase in home purchase applications, high rates have significantly dampened refinancing activity.
Why it matters
The shift toward riskier loan products suggests that high interest rates are straining household budgets and potentially increasing long-term financial vulnerability in the housing market.
Mortgage rates continue to move higher and that has demand for home loans stuck in place. It also, however, has more borrowers opting for riskier loans that offer lower rates.
Total mortgage application volume rose just 0.8% last week compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $832,750 or less, increased to 6.79% from 6.78%, with points decreasing to 0.65 from 0.66, including the origination fee, for loans with a 20% down payment.
"Mortgage rates reached their highest levels in four weeks as investors' concerns about inflation and growing deficits push yields higher across the globe," said Mike Fratantoni, senior vice president and chief economist at the MBA, in a release.
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