Current Mortgage Rates Hit 7.12% as Nearly 1 in 10 US Applicants Choose Riskier Loans With Payments That Can Rise

US mortgage rates have jumped to 7.12 per cent, the highest level in more than two years, with nearly one in ten new applications now for adjustable-rate mortgages as borrowers chase lower initial payments even though their costs could rise later.

The average contract rate for a 30-year fixed mortgage reached 7.12 per cent in the Mortgage Bankers Association (MBA) survey for the week ending 18 September 2026, up 15 basis points from 6.97 per cent and the highest level since May 2024.

At the same time, the share of mortgage applications for adjustable-rate mortgages (ARMs) rose to 9.8 per cent from 8.4 per cent.

The ARM Payment Gap Widens

The shift towards ARMs came as the cost of the two loan types moved in opposite directions. The MBA's average rate for a 5/1 ARM fell to 6.10 per cent from 6.23 per cent, while the 30-year fixed rate rose to 7.12 per cent.

That left the initial ARM rate 1.02 percentage points below the fixed-rate average. The ARM application index also jumped about 15 per cent from the previous week, while fixed-rate applications declined.

Mike Fratantoni, MBA's senior vice president and chief economist, said more applicants opted for ARMs because 5/1 rates were more than a percentage point below 30-year fixed mortgages. The difference is substantial on a $400,000 loan.

At 7.12 per cent, the monthly principal-and-interest payment on a 30-year fixed mortgage is about $2,694. At 6.10 per cent, the initial payment on a 5/1 ARM would be about $2,424, a difference of roughly $270 a month. The examples exclude taxes, insurance, points and other borrowing costs.

That lower starting payment comes with a different rate structure. A 5/1 ARM typically keeps its initial rate for five years before allowing adjustments under the terms of the loan.

The rate can rise or fall after that period, subject to its index, margin and contractual caps, meaning the initial saving does not guarantee a lower payment over the life of the mortgage.

The 9.8 per cent figure also needs context. It represents the share of mortgage applications in the MBA's weekly survey, not the proportion of US homeowners who have switched to ARMs.

Mortgage Demand Weakens

Higher rates were accompanied by weaker overall mortgage activity. Total mortgage applications fell 1.5% on a seasonally adjusted basis from the previous week. Purchase applications declined 1%, while refinance applications fell 3%. Refinancing activity was 62% below its level a year earlier and reached its slowest pace since February 2025.

Purchase activity was also about 11% lower than a year earlier, extending the decline in demand beyond the refinancing market. The refinance share of total applications was 39.3%. FHA loans accounted for 16.7% of applications, while loans backed by the US Department of Veterans Affairs represented 12.0%.

7.12% Is Not Every Borrower's Rate

The MBA figure is a benchmark rather than a rate offered to every borrower. Freddie Mac's Primary Mortgage Market Survey, a weekly measure of average US mortgage rates, put the average 30-year fixed mortgage rate at 6.95% on 17 September, up from 6.76% the previous week.

Zillow Home Loans listed a 30-year fixed rate of 7.25% on 23 September. The measures differ in timing, methodology and loan assumptions, while individual offers can also vary with factors including credit profile, down payment, loan type and points.

The Federal Reserve announced a 25-basis-point increase on 16 September, taking its target federal funds range to 3.75% to 4.00%. Mortgage rates do not move one-for-one with the Fed's policy rate because longer-term market yields and expectations for inflation and economic growth also influence mortgage pricing.