A hefty 97 percent of prime borrowers who originally had 1-year conforming adjustable-rate mortgages refinanced into fixed loans during the second quarter, according to a report from mortgage financier Freddie Mac.
Those numbers are up from a revised 92 percent and 80 percent in the first quarter, revealing the growing trend towards safety and stability in today’s uncertain market.
“Even though refinancing borrowers who take out a 1-year adjustable rate mortgage (ARM) today would save about three-quarters of a percentage point in rate relative to a 5-year ARM or 15-year fixed-rate mortgage (FRM), the concerns about inflationary pressures leading to future interest rate increases may be causing borrowers to choose the safety and certainty of fixed rates,” said Frank Nothaft, chief economist for Freddie Mac.
“In the second quarter, mortgage rates on all products crept up a bit, with 15-year fixed mortgage rates averaging 5.7 percent, the same as for a 5-1 hybrid ARM loan.”
Freddie Mac’s Refinance Product Transition Report also found that nearly all those who had a fixed-rate loan refinanced back into another long-term, fixed-rate product.
Roughly 50 percent of borrowers who held a 15-year fixed-rate loan refinanced into the same loan program, while the remainder chose a longer fixed-rate term.
Of borrowers holding 30-year fixed-rate loans, more than 75 percent chose the same product when it came time to refinance, while the remaining group opted for shorter-term fixed-rate loans.