Demand for adjustable-rate mortgages surges, as interest rates make biggest jump in 13 years

Abstract

Mortgage applications to purchase a home rose 8% last week compared with the previous week, bolstered in part by demand for adjustable-rate mortgages, according to the Mortgage Bankers Association's seasonally adjusted index. Applications were 10% lower than they were in the same week one year ago. Mortgage rates surged to the highest level since 2008, while making their biggest one-week jump last week in 13 years. Rates are now nearly double what they were one year ago. "The average loan size, at just over $420,000, is well below its $460,000 peak earlier this year and is potentially a sign that home price-growth is moderating." Adjustable-rate mortgages offer lower interest rates and can generally be fixed for terms of five, seven or 10 years. Active inventory nationwide is now up 17% year over year according to Realtor.com. Applications to refinance a home loan fell 3% for the week and were 77% lower than the same week one year ago.