ARM share reached 8% last week, its highest level in five weeks, as the spread between adjustable and fixed rates widened.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $832,750 or less increased to 6.79% from 6.78% last week, with points decreasing to 0.65 from 0.66, including the origination fee, for loans with a 20% down payment, the Mortgage Bankers Association reported.
Total mortgage application volume rose 0.8% for the week, according to the association's seasonally adjusted index. Applications for a mortgage to purchase a home gained 2% for the week but remained 0.2% lower than the same week one year ago, when rates were 15 basis points lower.
The average contract interest rate for 5/1 adjustable-rate mortgages fell to 5.94%. The ARM share of applications returned to 8% last week, its highest level in five weeks, the association said.
"Mortgage rates reached their highest levels in four weeks as investors' concerns about inflation and growing deficits push yields higher across the globe," said Mike Fratantoni, senior vice president and chief economist at the MBA.
Applications to refinance a home loan dropped 1% for the week and were 19% lower than the same week one year ago. Mortgage rates continued to move up this week, reaching the highest level since June 2025, according to Mortgage News Daily.
"In many local markets, potential buyers have plenty of homes to choose, and this is likely supporting transaction volume," Fratantoni said. "Another trend we're monitoring is more borrowers choosing ARMs, with the ARM share back to 8 percent last week, its highest level in 5 weeks."
These ARMs can be fixed for up to 10 years, but they will adjust to whatever the rate is in the future. With rates as high as they are now, most borrowers have very little incentive to refinance unless they need to pull equity out of their homes, the association said.
The Deployment Angle
Family Office Real Estate Daily Desk · our analysis, not the source's
A spread of 85 basis points between 5/1 ARMs at 5.94% and 30-year fixed at 6.79% represents the widest discount adjustable products have carried in more than a year. For family offices building or recapitalizing single-family rental portfolios, this opens a tactical route: finance stabilized assets with short-duration debt, lock the spread, and refinance into fixed when the curve steepens or the Federal Reserve pivots.
The arithmetic matters. On a $50 million portfolio financed at 65% loan-to-value, the ARM saves roughly $276,000 in annual interest expense relative to fixed-rate debt. Over a five-year hold, that compounds to $1.4 million before considering reinvestment return. The risk is refinancing into a higher rate environment in 2030, but the math favors ARMs if you believe inflation moderates or recession forces cuts within the next 36 months.
The 8% ARM share—its highest in five weeks—suggests retail borrowers are pricing in near-term rate relief. Family offices should resist that optimism when underwriting. Model the worst case: rates hold at 7% or higher through 2029, and the ARM resets at par or above today's fixed alternative. If the asset still pencils with a 7.5% all-in cost at year six, the five-year savings justify the structure. If not, pay the premium for fixed and eliminate refinancing risk.
Avoid ARMs on value-add or lease-up deals where cash flow is back-loaded. The structure works for stabilized, cash-flowing properties where the interest savings drop straight to distribution and where you have the balance-sheet capacity to refinance or sell before the reset. On anything with construction or repositioning risk, the fixed-rate certainty is worth 85 basis points.
