95% of borrowers refinancing through HARP select fixed-rate mortgages
Borrowers refinancing home loans in the second quarter overwhelming chose fixed-rate mortgages even if they previously held variable-interest rate loans, Freddie Mac said in its Quarterly Product Transition Report.
Of those borrowers refinancing out of hybrid ARMs, 81% moved into fixed-rate loans in 2Q, the highest transition from variable to fixed-rate loans since the second quarter of 2010.
The remaining 19% chose to refinance into the same type of ARM product.
Of those who refinanced, 30% managed to reduce their loan terms, while 67% kept the same terms.
Only twenty-five percent of borrowers refinancing through the government's Home Affordable Refinance Program shortened the terms of their mortgages, while 30% of those refinancing outside of HARP managed to do so.
Meanwhile, 95% of borrowers refinancing out of an ARM using HARP chose to transition to a fixed-rate mortgage.
Much of the new refinancing activity was spurred along by low interest rates.
"Fixed mortgage rates averaged 3.79% for 30-year loans and 3.04% for 15-year products during the second quarter in Freddie Mac's primary mortgage market survey," said Frank Nothaft, Freddie Mac's vice president and chief economist.
"The Bureau of Economic Analysis has estimated the average coupon on single-family loans was about 5% percent during the second quarter of 2012. It's no wonder we continue to see strong refinance activity into fixed-rate loans."