Rising mortgage rates cause surge in demand for riskier loans
Potential buyers arrive during an open house on Saturday, May 9, 2026 in Rancho Cucamonga, California, USA.
Kyle Grillot | Bloomberg | Getty Images
Mortgage interest rates continued to rise last week, reducing loan demand from both existing homeowners and potential homebuyers. They also steered consumers toward riskier loans that offered lower interest rates.
Total mortgage application volume fell 2.3% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average weekly contract interest rate for 30-year fixed-rate mortgages with loan balances of $832,750 or less increased to 6.56% from 6.46% last week; Points including the origination fee for loans with 20% down payment decreased from 0.63 to 0.60. This is the highest rate in the last 7 weeks.
“Ongoing concerns about inflation resulting from higher fuel costs, combined with rising concerns about global public debt, caused Treasury yields to rise further in the U.S. and abroad last week,” MBA economist Joel Kan said in a statement.
The share of adjustable-rate mortgage (ARM) applications in total applications increased to approximately 10%, reaching its highest level since October 2025. ARMs are considered riskier because their rates reset after a certain period of time. The average rate for a 5-year ARM last week was 5.76%.
Mortgage applications to buy a home fell 4% this week and were just 8% higher than the same week a year ago. At this time last year, mortgage rates were close to 7%.
Applications to refinance a mortgage fell 0.1% from the previous week and rose 35% from the same week a year ago.
“Overall applications fell to a five-week low as borrowers withdrawing from conventional and government loan types,” Kan added.
Mortgage rates continued to rise this week, reaching their highest level since last July, according to a separate survey from Mortgage News Daily.
