Mortgage Rates Hit 2024 High, Dampening Loan Demand

Mortgage rates soared to the highest level since 2024 last week, causing loan demand to fall back again and more borrowers to opt for riskier loans. Total application volume decreased 1.5% from 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 7.12% from 6.97%, with points increasing to 0.73 from 0.72, including the origination fee, for loans with a 20% down payment.

Applications to refinance a home loan dropped 3% for the week and were 62% lower than the same week one year ago. That was the lowest level since February 2025. The 30-year fixed loan was 78 basis points, or more than a quarter of a percentage point lower at the same time last year.

Applications for a mortgage to purchase a home fell 1% for the week and were 11% lower year-over year. The fall housing market, usually the second busiest compared with spring, is now underway, but real estate agents are already noting a sharp pullback due to higher rates. Buyers and current homeowners are also searching for savings anywhere they can find them, even in riskier, adjustable-rate loans.

"With fixed rates much higher, more borrowers opted for ARMs, with the ARM share reaching 9.8%, as rates for 5/1 ARMs were more than a percentage point lower than those for fixed rate loans," said Mike Fratantoni, MBA's SVP and chief economist.

The ARM share of applications the week before last was just 8.4%. During the first years of the pandemic, when rates were hitting multiple record lows, the ARM share was barely 3%. ARMs can carry a fixed rate for up to 10 years but will adjust either higher or lower depending on where the market is when that term is up.

Mortgage rates moved slightly lower to start this week, according to a separate survey from Mortgage News Daily, as the price of oil fell and bond yields moved lower as a result.