Mortgage Rates Hit 7.79% Average, Driving Away Buyers But Boosting Appeal of Adjustable-Rate Mortgages

Mortgage rates increased again last week, hitting 7.79% on average for a 30-year fixed rate mortgage. Rates have risen for 11 straight weeks.

High rates are causing many potential homebuyers to exit the market. Mortgage applications for purchases fell 2% last week and are down 22% from a year ago.

Some buyers are turning to adjustable-rate mortgages (ARMs) which offer lower initial rates. The share of ARMs rose to 9.5% of applications.

Homebuilders are offering incentives like permanently lower mortgage rates to attract buyers. New home sales have increased as a result.

Mortgage rates are expected to keep rising as the 10-year Treasury yield climbs. Rates will likely stay high for a while until inflation and the economy improve.