Mortgage Rates Fall to 7.37%, Applications Rise 3.4% Last Week

Mortgage rates fell for the second consecutive week, with the average contract interest rate for 30-year fixed-rate mortgages decreasing to 7.37% from 7.41%. This rate applies to loans with conforming balances of $832,750 or less and a 20% down payment. The Mortgage Bankers Association (MBA) reported a 3.4% rise in total mortgage application volume compared to the prior week.

Applications for adjustable-rate mortgages (ARMs), considered riskier loans, reached 11.3% of total applications, the highest in over a year. The average contract interest rate for 5/1 ARMs also decreased slightly to 6.41% from 6.46%. Purchase mortgage applications increased 4% week-over-week but remained 18% lower than the same week last year. Refinancing applications climbed 3% for the week yet were 61% below levels from a year ago.

Despite the recent rate decline, mortgage rates remain over a percentage point higher than last year, with about half of current borrowers holding rates below 4%. Rising home prices and economic uncertainty, including the upcoming midterm elections, continue to influence borrower behavior. Mortgage rates have been stable at the start of the current week ahead of the Federal Reserve's upcoming decision, which is not expected to alter interest rates.

This trend shows that even with lower rates, refinancing demand remains weak and borrowers are increasingly turning to riskier adjustable-rate loans. The key factor for investors is how mortgage rates around 7.37% affect borrowing costs, housing demand, and loan risk profiles.