Mortgage Rates Are High. Homebuyers Are Ditching Adjustable-Rate Options Anyway.

Mortgage demand remained largely unchanged last week as borrowing costs continued to move within a narrow range. At the same time, prospective homebuyers showed less interest in adjustable-rate mortgages, signaling a preference for stability despite elevated interest rates.

New data from the Mortgage Bankers Association (MBA) reported by CNBC showed that total mortgage application volume edged up just 0.04% from the previous week on a seasonally adjusted basis.

The average interest rate for a standard 30-year fixed-rate mortgage with conforming loan balances of $832,750 or less slipped slightly to 6.57%, down from 6.59% the previous week. While the decline was modest, it was enough to encourage a small increase in home purchase applications, even as refinancing activity softened.

One of the most notable shifts in the latest report was the continued decline in demand for adjustable-rate mortgages, commonly known as ARMs. These loans typically offer lower introductory interest rates than traditional fixed-rate mortgages, making them attractive when borrowing costs are high. However, their rates reset after an initial fixed period, exposing borrowers to potentially higher monthly payments if market rates increase.

The average rate for a five-year ARM climbed to 5.79% from 5.68% a week earlier, narrowing the savings advantage over a 30-year fixed mortgage. As that gap narrowed, ARM applications fell to just 7.6% of all mortgage applications, the lowest share since January. The figure marks a sharp decline from mid-May, when adjustable-rate loans accounted for 9.6% of applications.

The trend suggests that many borrowers are no longer willing to assume additional interest-rate risk for relatively modest upfront savings. During periods when the spread between fixed and adjustable loans widens, ARMs often gain popularity because they can significantly reduce monthly payments during the initial years of homeownership. With that advantage shrinking, many buyers appear to be choosing the predictability of fixed-rate financing instead.

Joel Kan, the MBA’s vice president and deputy chief economist, said lower oil prices helped push mortgage rates slightly lower during the week, contributing to a modest pickup in housing activity.

“Mortgage rates eased slightly last week as oil prices declined. As a result, mortgage applications increased modestly, with an uptick in purchase activity offsetting a smaller decline in refinances,” Kan said in the association’s weekly report.

Applications to refinance existing mortgages fell 1% from the previous week, although they were still 9% higher than during the same period a year ago. Mortgage rates were about 22 basis points higher than one year earlier, giving some homeowners greater incentive to refinance today despite rates remaining well above pandemic-era lows.

Home purchase activity showed somewhat stronger momentum. Applications to buy homes rose 1% over the week and were 3% higher than a year ago, extending a trend of modest annual gains that has persisted for nearly three months.

Housing economists say the purchase market has shown greater resilience than expected in recent months, even as affordability remains strained. A gradual increase in housing inventory across many regions has also given buyers more negotiating power after years of tight supply.

Kan noted that improving market conditions are helping sustain buyer demand. “Purchase applications remain ahead of 2025’s pace and have exhibited year-over-year growth for almost three months, as prospective homebuyers are finding opportunities in markets with ample inventory and easing home-price growth,” he said.

However, mortgage rates remain above 6.5%, far higher than the record lows seen during the pandemic, keeping monthly payments elevated for many first-time buyers. Combined with home prices that remain historically high in many metropolitan areas, affordability continues to limit sales activity.