Higher mortgage rates are affecting more than the housing market's pace. They're also nudging some borrowers toward loans that look cheaper at the start but may cost more later.
As Realtor.com reported, the shift is emerging as mortgage demand weakens and affordability remains a major obstacle for prospective buyers.
Here's what to know
According to the Mortgage Bankers Association (MBA), seasonally adjusted mortgage applications for the week ending September 4, 2026, fell 2.7%, as Realtor.com reported.
MBA data showed its Purchase Index, an early gauge of home sales, slipped 0.2% and was 4% below the same period in 2025. Refinance applications fell 6% and were 25% below the same period in 2025.
Joel Kan, the MBA's vice president and deputy chief economist, said, "Higher mortgage rates continue to weigh on prospective homebuyers looking to act, even as housing inventory has increased in many markets."
Rate moves were mixed. MBA said the average 30-year fixed mortgage rate rose from 6.79% to 6.85%, and 30-year jumbo rates climbed to 7.08%, while adjustable-rate mortgage rates declined from 5.94% to 5.82%.
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More background
Elevated rates and continuing market pressures are keeping some buyers on the sidelines and pushing others toward riskier loans.
Adjustable-rate mortgages, or ARMs, generally open with a lower rate than traditional fixed loans. Once that introductory period ends, though, monthly payments can change and may rise sharply if interest rates have gone up.
Realtor.com reported that expiring ARMs were often cited as a major cause of the 2008 housing crash and the recession that followed.
What can be done?
An ARM's lower initial rate can create short-term savings, but borrowers should look beyond the starting monthly payment. They also need to know when the rate can reset and how much a later payment could rise.
It can also help to compare multiple loan offers rather than focusing only on an advertised rate. As Realtor.com reported, mortgage pricing is influenced by broader economic conditions, and a borrower's credit score and loan term help determine the rate they may get.
For 30-year mortgages, lenders often use the 10-year Treasury yield as a benchmark and then add a risk premium. One reason is that many of those loans are refinanced or paid off after about eight to 11 years.
Kan summed up the trend this way: "Purchase applications overall were little changed from last week, but more borrowers have shifted to using ARM loans, with the ARM share of applications at 8.5%, the highest share since June."
Where can I learn more?
Higher borrowing costs are hitting at the same time as other increased housing expenses, making affordability even tougher for buyers already considering adjustable-rate loans. Here are a few examples of how rising insurance premiums and climate-related risks are adding pressure across U.S. housing markets.
• U.S. homebuyers face an overlooked financial obstacle as insurance costs drag down sales.
• Across America, a new market reality is taking shape as extreme weather drives premiums higher.
• In California, CSAA customers could face coverage gaps after a major insurer files for another rate hike.
The broader point is that, in many cases, the monthly cost of homeownership now goes well beyond the mortgage payment. That squeeze helps explain why some borrowers put off buying while others turn to riskier loans.
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