Home buyers were taking out mortgages in higher numbers last week. Applications to purchase a home increased 5 percent and are now 4 percent higher than the same week one year ago, the Mortgage Bankers Association reported Wednesday.
But higher home prices appear to be pushing more buyers toward adjustable-rate mortgages, the MBA reports. ARMs tend to carry lower initial interest rates. The ARM share of total mortgage applications is now 8 percent higher than a year ago.
The interest rate on the 30-year fixed-rate mortgage increased from 4.18 percent to a 4.2 percent average, the MBA reports. The higher rates caused a pullback from current homeowners, with applications to refinance dropping 5 percent last week, which is down nearly 26 percent from a year ago. Despite the slight uptick, rates are slightly lower than a year ago. This is the first time rates have been below their year-ago average in 2017, the MBA reports.
The decrease in refinance applications prompted the overall MBA loan index—which reflects refinance and home purchase demand—to basically remain flat this week, inching up just 0.1 percent for the week, the MBA reports.