As if they couldn’t get any more popular, fixed-rate mortgages grabbed even more market share during the fourth quarter, according to mortgage financier Freddie Mac’s quarterly refinance report.
An overwhelming 97 percent of prime borrowers who originally had conforming ARMs chose a fixed-rate mortgage when they refinanced, up from 85 percent a quarter earlier.
Additionally, 99.7 percent of borrowers who originally had a fixed-rate loan refinanced back into a fixed-rate mortgage, up from 97 percent in the third quarter.
“The very low interest rates for fixed-rate loans compared with ARM rates in the fourth quarter, combined with worries that rates may rise in the future when the economic recession ends, enticed refinancing borrowers to seek the security of long-term fixed-rate mortgages,” said Frank Nothaft, chief economist for Freddie Mac.
“When borrowers can lock in a rate of 5 percent or less for 15 years or longer, it’s hard to find a reason not to take it.
Only three percent of those who initially had hybrid ARMs refinanced back into a like product, down from 15 percent a quarter earlier, partially because teaser rates were no longer favorable.
“During much of the fourth quarter, initial interest rates on hybrid ARM loans were close to or above interest rates on 15-year and 30-year fixed-rate mortgages. In that pricing environment, fixed-rate loans appear very attractive to borrowers. As a consequence, nearly all borrowers who refinanced chose a fixed-rate loan.”
Well, at least it appears as if borrowers are coming to terms with reality and looking at the long term with their fixed-rate loans, right?
Or maybe they’re just choosing them because they have the lowest mortgage rate available. :)