India, Sept. 9 -- Mortgage rates moved higher last week, pushing some borrowers toward adjustable-rate mortgages (ARMs) as they looked for cheaper loan options. The rise in rates also caused overall mortgage demand to fall, with total mortgage applications dropping 2.7% for the week, according to the Mortgage Bankers Association (MBA).

The share of borrowers choosing ARMs increased last week. ARM applications made up 8.5% of all mortgage applications, up from 8% the previous week, according to the MBA. ARM demand has now reached its highest level since June. ARMs are becoming more attractive to some borrowers because they usually start with a lower interest rate than a traditional 30-year fixed mortgage.

ARMs can offer a lower rate for ...