High mortgage rates send homebuyers scrambling for relief

LOS ANGELES (AP) — 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...