Majority of Refinancing Borrowers Choose Fixed-Rate Mortgages ...

said on May 23rd, 2012 filed under: Real Estate Information

In the first quarter of 2012, fixed-rate loans accounted for more than 95 percent of refinance loans, based on the Freddie Mac Quarterly Product Transition Report released today. Refinancing borrowers clearly preferred fixed-rate loans, regardless of whether their original loan was an adjustable-rate mortgage (ARM) or a fixed-rate.

Of borrowers who refinanced during the first quarter of 2012, 31 percent reduced their loan term by paying off a 30-year loan and replacing it with a 20-year, 15-year, or other shorter-term loan. In addition, 66 percent of borrowers kept the same term as the loan that they had paid off.

Sixty-eight percent of borrowers who had a hybrid ARM chose a fixed-rate loan during the first quarter, the highest share since the first quarter of last year, while the remaining 32 percent chose to refinance into the same type of product.

According to Frank Nothaft, Freddie Mac vice president and chief economist, ?Fixed mortgage rates averaged 3.92 percent for 30-year loans and 3.19 percent for 15-year product during the first quarter in Freddie Mac?s Primary Mortgage Market Survey ?, well below long-term averages.?

?For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term,? adds Nothaft. ?Further, under the enhanced Home Affordable Refinance Program?HARP?announced by FHFA on October 24, 2011, certain risk-based fees are waived for HARP borrowers who refinance into shorter-term loans.?

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Written by Rick Andrews

This entry was posted on Wednesday, May 23rd, 2012 at 6:11 am and is filed under Real Estate Information. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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