Adjustable-rate mortgages continue to fall out of fashion with homeowners as most who refinanced during the third quarter opted for less volatile fixed-rate mortgages, according to a quarterly report issued by Freddie Mac.
The Refinance Product Transition Report indicated that 85 percent of borrowers originally wrapped up in one-year adjustable-rate mortgages switched to fixed-rate mortgages when they refinanced, while 82 percent of borrowers with hybrid ARMs refinanced into fixed loans.
These numbers compare to 86 percent and 85 percent, respectively, in the second quarter of 2007.
However, the report revealed that refinancing into a 30-year fixed-rate mortgage among borrowers who originally had an adjustable-rate or a fixed-rate loan increased in the third quarter of 2007 compared to the prior quarter.
According to Freddie Mac’s Primary Mortgage Market Survey®, average 30-year fixed rates in September were 0.32% lower than rates in July.
“Mortgage rates on 30-year fixed-rate conventional conforming loans became more favorable during the third quarter after topping out at 6.7 percent in July,” said Amy Crews Cutts, deputy chief economist for Freddie Mac, in a release.
“Although the spread between the 30-year fixed-rate and 15-year fixed-rate mortgages did not move significantly in the third quarter, more borrowers replaced their 15-year fixed-rate mortgages with 30-year fixed-rates when they refinanced,” Cutts added.
Borrowers in 15-year fixed mortgages also made the 30-year fixed switch, with 58 percent refinancing into the popular loan program during the third quarter.
Only 5 percent of homeowners opted to refinance to a 15-year fixed mortgage from a 30-year fixed mortgage during the third quarter, the lowest level since the first quarter of 2002.
These data estimates come from a sample of properties on which Freddie Mac has funded a minimum of two successive loans.