Please ensure Javascript is enabled for purposes of website accessibility
High Mortgage Rates Send Homebuyers Scrambling for Options
gvw_ap_news
By Associated Press
Published 3 years ago on
November 23, 2022

Share

Mortgage rates are more than double what they were a year ago, so many homebuyers are looking for ways to put off some of the pain for a few years.

The trend has driven adjustable-rate mortgages, or ARMs, to the highest usage in over a decade.

A recent snapshot by the Mortgage Bankers Association showed that ARMs accounted for 12.8% of all home loan applications in the week ended Oct. 14. The last time these loans made up a bigger share of all mortgage applications was in the first week of March 2008.

At the start of the year ARMs represented only 3.1% of all mortgage applications. The average rate on a 30-year fixed-rate mortgage then was 3.22%, while last month that rate topped 7% — the highest since 2002.

This week, the average rate for a 30-year mortgage fell to 6.58 %, according to mortgage buyer Freddie Mac. A year ago, it was 3.1%.

Mortgage rates’ swift rise follows a sharp increase in the yield on the 10-year Treasury note, which has climbed amid expectations of higher interest rates overall as the Federal Reserve has hiked its short-term rate in a bid to crush the highest inflation in decades.

As mortgage rates rise, they can add hundreds of dollars to monthly mortgage payments. That’s a significant hurdle for many would-be homebuyers, resulting in this year’s housing downturn. Last month, sales of previously occupied U.S. homes fell for the ninth consecutive month. Annual sales are running at the slowest pre-pandemic pace in more than 10 years.

For house hunters still able to afford a home at current elevated mortgage rates, reducing their monthly payments with an adjustable-rate loan for the first few years can help give them financial flexibility.

A homebuyer who takes out a typical 5/1 ARM, for example, will have a low, fixed rate for the first five years of the loan. After that, the loan shifts to an adjustable interest rate, which could be higher or lower, until the debt is paid off, or the buyer refinances the loan.

Another approach that’s become popular recently is buying down the interest rate on a fixed-rate 30-year loan for the first two or three years.

Buying down the rate on a 30-year mortgage can make monthly payments more manageable -— something both homebuilders and homeowners are offering to entice buyers as the housing market slows.

Let’s say a borrower takes out a 30-year mortgage with a 6% fixed rate. With what’s known as a 3-2-1 rate buydown, that homebuyer’s interest rate would be 3% in the first year of the loan, 4% in the second and 5% in the third, saving them potentially thousands of dollars along the way.

The borrower must still qualify for the full monthly payment before the buydown adjustment, however.

RELATED TOPICS:

DON'T MISS

What Are Fresno Real Estate Experts Predicting for 2025 and Beyond?

DON'T MISS

First California EV Mandates Hit Automakers This Year. Most Are Not Even Close

DON'T MISS

Madera County Wildfire Prompts Evacuation Warnings, Road Closures

DON'T MISS

Sanger Police Seek Public’s Help to Find Missing Teen

DON'T MISS

Trump Says Everyone Should Immediately Evacuate Tehran

DON'T MISS

Inside Trump’s Extraordinary Turnaround on Immigration Raids

DON'T MISS

Trump Approval Steady at 42%, Support Weakens for His Immigration Policy, Reuters/Ipsos Poll Finds

DON'T MISS

Person Rescued from Fresno Canal, Third Incident in Recent Days

DON'T MISS

Arias Dodges Questions About His False Fresno ICE Raid Claim

DON'T MISS

Iranian State TV Halts Live Broadcast After Israeli Strike

DON'T MISS

Global Markets Recover on Iran Ceasefire Reports, Central Banks in Focus

DON'T MISS

Madera Man Sentenced to Over 21 Years for Fentanyl, Meth Trafficking

UP NEXT

Mass Deportations Could Cost California Over $275 Billion, UC Merced Report Warns

UP NEXT

US Labor Market Softening; Single-Family Building Permits Slump

UP NEXT

Wall Street Indexes Edge Higher Ahead of Fed’s Interest Rate Verdict

UP NEXT

The S&P 500 Is Nearing a Record. Really.

UP NEXT

US Retail Sales Post Biggest Drop in Four Months

UP NEXT

Wall Street Slips as Middle East Conflict Escalates

UP NEXT

Wall Street Climbs as Oil Prices Ease, Fed Meeting in Focus

UP NEXT

World Stocks Fall, Oil Prices Jump After Israel Attacks Iran

UP NEXT

Wall Street Falls as Israel’s Attack on Iran Erodes Risk Appetite

UP NEXT

Fed to Keep Rates Steady as Tariffs, Possible Oil Shock Counter Inflation Data

Fed Keeps Rates Steady but Pencils in Two Cuts by End of 2025, Warns of Inflation Ahead

3 hours ago

Putin Says He Does Not Want to Discuss the Possible Israeli-US Killing of Iran’s Supreme Leader

4 hours ago

A Little Coffee With Your Whiskey? Downtown Fresno Gets New Craft Cocktail Lounge

5 hours ago

‘Any Illegal Immigrants?’ Trump Quizzes Workers at the White House

5 hours ago

What Is Juneteenth and When Did It Become a US Federal Holiday?

5 hours ago

US B-2 Bombers, Bunker-Busters and Alternatives

5 hours ago

US Social Security, Medicare to Run Short of Funds in 2033, Trustees Say

5 hours ago

Buss Family to Sell Lakers, Report Says

5 hours ago

Trump Administration Resuming Student Visa Appointments, Official Says

5 hours ago

Teen Girl Accused as Getaway Driver in Caleb Quick Murder Appears in Court

6 hours ago

Trump Faces Uproar From MAGA Base Over Possible Iran Strike

WASHINGTON – The prospect of a U.S. strike against Iran has exposed divisions in the coalition of supporters that brought President Do...

3 hours ago

U.S. President Donald Trump holds a 'Make America Great Again' (MAGA) hat as he attends the commencement ceremony at West Point Military Academy in West Point, New York, U.S., May 24, 2025. REUTERS/Eduardo Munoz/File Photo
3 hours ago

Trump Faces Uproar From MAGA Base Over Possible Iran Strike

3 hours ago

Iran Would Accept Trump’s Offer to Meet Soon, New York Times Reports

3 hours ago

Meta in Talks to Hire Former GitHub CEO Nat Friedman to Join AI Efforts, The Information Reports

3 hours ago

Fed Keeps Rates Steady but Pencils in Two Cuts by End of 2025, Warns of Inflation Ahead

Russian President Vladimir Putin chairs a meeting with members of the Security Council via a video link at the Novo-Ogaryovo state residence outside Moscow, Russia June 10, 2025. (Reuters File)
4 hours ago

Putin Says He Does Not Want to Discuss the Possible Israeli-US Killing of Iran’s Supreme Leader

5 hours ago

A Little Coffee With Your Whiskey? Downtown Fresno Gets New Craft Cocktail Lounge

President Donald Trump talks about the new flag pole being installed on the South Lawn of the White House, in Washington, Wednesday, June, 18, 2025. President Trump decided to check the immigration status of a work crew installing a new flagpole at the White House. (Doug Mills/The New York Times)
5 hours ago

‘Any Illegal Immigrants?’ Trump Quizzes Workers at the White House

5 hours ago

What Is Juneteenth and When Did It Become a US Federal Holiday?

Help continue the work that gets you the news that matters most.

Search

Send this to a friend