High mortgage rates send homebuyers scrambling for relief

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.

One popular strategy: buying down the rate on a 30-year mortgage for the first two or three years, which can make monthly payments more manageable -— something both homebuilders and homeowners are offering to entice buyers as the housing market slows.

The trend has also 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% for the first time 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%. As mortgage rates increase, they can add hundreds of dollars to monthly mortgage payments.

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.