The mortgage rate rose further last week. Refinance demand crashed and potential homebuyers were forced to look for lower-risk loan products with higher rates.

According to the seasonally adjusted index of the Mortgage Bankers Association, the total volume of mortgage applications fell 8.3% last Wednesday compared to the prior week. The demand is half what it was one year ago.

Rates are rising. For loans with 20% down payments, the average 30-year fixed rate mortgage interest rate increased from 5.20% to 5.37%. Points rose to 0.67 from 0.66. This is the highest rate recorded since 2009. It was 3.17 percent the week before.

While there’s still a strong market for housing, buyers are seeing higher interest rates. The week’s mortgage applications for home purchases fell by 8% and was 17% less than one year ago. This was the beginning of the spring housing season.

Joel Kan (an MBA economist) stated that “the recent decline in purchasing applications is an indicator of potential weakness home sales in the future.”

However, buyers are turning to adjustable rate mortgages which have lower interest rates. Last week’s average rate for a 5-year adjustable-rate mortgage was 4.28%.

Last week’s ARM share was over 9% based upon loan count, and 17% based by dollar volume. Kan noted that the ARM share is now at 9%. This coincides with the 1.5 percent increase in the fixed rate for 30-years to 9%.

Fixed ARMs are available for five-, seven-, or ten year terms. However, they adjust when the market rate changes so that they can be considered slightly more risky than an ARM with a fixed term of 30 years.

Refinance applications for home loans fell by 9% in the past week, and they were 71% less than one year ago. Refinance applications fell to 35% of all total. This was 61% of the total volume of applications a year earlier.

In 2020, mortgage rates reached more than 12 record lows and remained at those levels through 2021. Many borrowers have refinanced at rates much lower than what they are today. While mortgage rates were slightly lower to begin this week as bonds yields dropped, they are likely to rise throughout the rest of the year.