In the second quarter of 2011, fixed-rate loans accounted for about 95 percent of refinance loans, based on the Freddie Mac (OTC: FMCC) Quarterly Product Transition Report released recently. Refinancing borrowers preferred fixed-rate loans, regardless of whether their original loan was an adjustable-rate mortgage (ARM) or a fixed-rate.
According to the report, an increasing share of refinancing borrowers chose to shorten their loan terms during the second quarter. Of borrowers who paid off a 30-year fixed-rate loan, 37 percent chose a 15- or 20-year loan, the highest such share since the third quarter of 2003.
Additionally, 55 percent of borrowers who had a hybrid ARM chose a fixed-rate loan during the second quarter, while the remaining 45 percent chose to refinance into the same type of product. The share refinancing from hybrid ARM to hybrid ARM was the highest since the second quarter of 2004.
“Fixed mortgage rates averaged 4.65 percent for 30-year loans and 3.84 percent for 15-year product during the second quarter in Freddie Mac’s Primary Mortgage Market Survey®, well below long-term averages,” says Frank Nothaft, Freddie Mac vice president and chief economist. “The Bureau of Economic Analysis has estimated the average coupon on single-family loans was about 5.3 percent during the second quarter of 2011. It’s no wonder we continue to see strong refinance activity into fixed-rate loans.”
For more information, visit www.freddiemac.com.