Mortgage applications dropped 8.5% for the week ending April 11, according to a weekly survey by the Mortgage Bankers Association. Refinances fell 12% from the week prior and purchase applications decreased 5%.

The drop in applications was blamed on a sudden rise in mortgage rates last week. Interest rates climbed 20 basis points from 6.61% to 6.81% last week, said Mike Fratantoni, MBA’s chief economist in a statement.

Mortgage demand was higher than the same week a year ago, Fratantoni noted. Purchase applications were up 13% compared to last year and refinances were up 68%.

Still, “economic uncertainty and the current volatility in rates is likely to make at least some prospective buyers more hesitant to move forward with a purchase,” Fratantoni said.

With the rise in interest rates, more borrowers are choosing adjustable-rate mortgages or ARMs, Fratantoni said. ARMs rose a full percentage for the total share of mortgage applications.

“Given the jump in rates, more borrowers are opting for the lower initial rates that come with an ARM, with initial fixed rates closer to 6% in our survey last week,” he said. “The ARM share at 9.6% (of total applications) was the highest since November 2023.”

The refinance share of mortgage activity for the week ending April 11 decreased to 41.3% of total applications from 43.6% the previous week.

The Federal Housing Administration share of total applications decreased to 15.8% from 16.3% the week prior. The U.S. Department of Veterans Affairs share of total applications decreased to 13.7% from 15.7% the week prior. The U.S. Department of Agriculture share of total applications remained unchanged at 0.5% from the week prior.