Over 95 Percent of Refinance Borrowers Choosing Fixed-Rate Loans
In the last quarter during 2011, fixed-rate home loans made up over 95 percent of all refinance loans, based upon a Freddie Mac (OTC: FMCC) Transition Quarterly Report recently released. Refinancing borrowers most
definitely preferred fixed-rate mortgages, regardless of whether their initial loan happened to be an adjustable (ARM) or a a fixed-rate mortgage.
Additionally an increasing allocation of borrowers who refinanced shortened the terms of their loans during the last quarter. Of borrowers who refinanced a fixed-rate 30-year loan, 43 percent went with a 15- or a 20-year mortgage, the highest such proportion since the first part of 2003.
Fifty-seven percent of mortgage borrowers with a hybrid ARM moved over to a mortgage with a fixed-rate in the last quarter, while the balance (43 percent) went ahead and refinanced into a same type of mortgage. Fixed rate mortgages averaged 4 percent on 30-year mortgages plus 3.30 percent on 15-year loans during the last quarter in the Freddie Mac Primary Mortgage Market Survey®, considerably under the long-term average,.
The Economic Analysis Bureau has estimated the typical coupon for single-family mortgages was around 5.2 percent for the last quarter of 2011. It’s no surprise we keep on seeing robust refinance movement into fixed-rate mortgages.
For borrowers induced to refinance by fixed low interest rates, they could get even lower interest rates by shortening the term.
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When compared with a 30-year mortgage with a fixed-rate, the interest rate for 15-year fixed loans was running around 0.7 percent less during the last quarter. And for borrowers planning on staying in their present home for just a few years, a hybrid ARM provides for even more savings in interest-rates. The initial interest interest rate for a 5/1 ARM hybrid loan was around 1.1 percent less than on a fixed-rate 30-year loan.
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Feb 17, 2012