Skip to main content

Freddie Mac Study Finds Fixed-Rates Preferred Over ARMs for Refis

Feb 16, 2011

In the fourth quarter of 2010, fixed-rate loans accounted for more than 95 percent of refinance loans, based on the Freddie Mac Quarterly Product Transition Report. Refinancing borrowers overwhelmingly chose fixed-rate loans, regardless of whether their original loan was an adjustable-rate mortgage (ARM) or a fixed-rate. The report also found that an increasing share of refinancing borrowers chose to shorten their loan terms during the fourth quarter. Of borrowers who paid off a 30-year fixed-rate loan, 32 percent chose a 15- or 20-year loan, the highest such share since the first quarter of 2004. Of borrowers who refinanced a 20-year loan, 70 percent chose a 15-year loan, the highest such percentage found in Freddie Mac's quarterly analysis. "Fixed mortgage rates continued to slide lower during the first part of the fourth quarter, reaching 4.17 percent for the 30-year mortgage in mid-November in Freddie Mac's Primary Mortgage Market Survey and the lowest fixed rates since the early 1950s," said Frank Nothaft, Freddie Mac vice president and chief economist. "It's no wonder borrowers are attracted to fixed-rate loans." The trend toward shorter terms also was clear in the annual 2010 data. Overall, 2010 had the largest percentage of borrowers since 2003 who shortened their term when refinancing a long-term, fixed-rate loan. "The mortgage rate on 15-year fixed was about five-eights percentage point below that on 30-year fixed during the fourth quarter," said Nothaft. "For borrowers motivated to refinance by low interest rates, they could obtain even lower rates by shortening their term. In 2010 we saw the largest share of borrowers shortening their term while refinancing since 2003." These estimates come from a sample of properties on which Freddie Mac has funded at least two successive loans and the latest loan is for refinance rather than for home purchase. Some loan products, such as one-year ARMs and balloons, are based on a small number of transactions. During 2010, the ARM share of applications was six percent in Freddie Mac's monthly ARM survey, which includes purchase-money as well as refinance applications. For more information, visit
About the author
Feb 16, 2011
Looking For Change Under Every Couch?

Don’t overlook the obvious – employees have ideas for cost savings, too

Jun 10, 2024
New American Funding Announces New Cash-Offer Program

Similar to Opendoor and Homeward, NAF Cash Maps offers buyers a bidding war advantage

Jun 05, 2024
CFPB Issues Public Inquiry On Junk Fees Affecting Closing Costs

Agency seeks to understand why closing costs are up, who is benefiting, and how costs can be lowered.

May 30, 2024
STRATMOR, Teraverde Deal A 'Merger Of Equals'

The recent merger of mortgage advisory firms came without the need to lay people off or make any major staffing changes.

May 23, 2024
NEXA Pays Loan Officers 100% Of Commission Splits

LOs won't pay per-file fees or other hidden fees with NEXA100, says NEXA Founder and CEO Mike Kortas.

May 22, 2024
The Right Prescription

‘Doctor Loans’ making healthy strides in Florida

May 21, 2024