Most Borrowers Choose Fixed-Rate Mortgages for Refinancing, Freddie Says
Borrowers who are refinancing their homes are taking advantage of the lowest fixed-mortgage rates in the past 50 years, according to Freddie Mac's quarterly Product Transition Report today. The report indicates 95% of refinance loans completed in Q210 were processed with a fixed-rate mortgage (FRM). "The ability to lock in a principal and interest payment at below 5% for 30 years is rare enough," said Frank Nothaft, Freddie's vice president and chief economist. "The share of borrowers shortening their amortization terms is at its highest level in six years." Freddie Mac reported that refinancing borrowers overwhelmingly chose a 30- or 15-year FRM regardless of whether their previous loan was an FRM or adjustable-rate mortgage (ARM). The report said 30% of borrowers who originally held a 30-year FRM refinanced into a 15- or a 20-year FRM, pushing the inventory of both loan categories to their highest level since 2004. Freddie's Product Transition Report bases its estimates on a sample of properties on which the GSE has funded at least two successive loans -- the latest of which represents a refinance. The government plans to enhance refinancing next month with the launch of the "FHA Short Refinance" program, which will extend additional refinancing options to underwater homeowners starting Sept. 7. Write to Christine Ricciardi.