Skip to main content

Fixed Rates Remain the Dominant Choice Among Refinancing Borrowers

Feb 14, 2012

In the fourth quarter of 2011, fixed-rate mortgages (FRMs) accounted for more than 95 percent of refinance loans, based on the Freddie Mac Quarterly Product Transition Report. An increasing share of refinancing borrowers chose to shorten their loan terms during the fourth quarter of 2011 as well. Of borrowers who paid off a 30-year FRM, 43 percent chose a 15- or 20-year loan, the highest such share since the first quarter of 2003. "Fixed mortgage rates averaged four percent for 30-year loans and 3.30 percent for 15-year product during the fourth quarter in Freddie Mac's Primary Mortgage Market Survey (PMMS), well below long-term averages," said Frank Nothaft, Freddie Mac vice president and chief economist. "The Bureau of Economic Analysis has estimated the average coupon on single-family loans was about 5.2 percent during the fourth quarter of 2011. It's no wonder we continue to see strong refinance activity into fixed-rate loans." Fifty-eight percent of borrowers who had a hybrid adjustable-rate mortgage (ARM) transitioned to an FRM during the fourth quarter, while the remaining 42 percent chose to refinance into the same type of product. "For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term," said Nothaft. "Compared to a 30-year fixed-rate mortgage, the interest rate on 15-year fixed was about 0.7 percentage points lower during the fourth quarter. And for borrowers who plan to remain in their current home for only a few years, the hybrid ARM allows for even a greater interest-rate savings. The initial interest rate on a 5/1 hybrid ARM was about 1.1 percentage points lower than on a 30-year fixed-rate loan."
About the author
Published
Feb 14, 2012
Moody’s Downgrades Fannie And Freddie Following U.S. Sovereign Credit Cut

Outlooks for both GSEs revised from negative to stable

May 20, 2025
A&D Mortgage Completes $427M Non-QM Securitization

Company says transaction highlights expansion in the Non-QM market, notes it expects to price more deals this year

May 19, 2025
These U.S. Metros Could Be First-Time Buyers' Best Chance To Close A Loan

Even among top 10 most affordable areas, home sale prices more than doubled in four, nearly doubled in another three since 2015

May 15, 2025
As HELOC Opportunities Grow, Angel Oak Completes Its First HELOC Securitization

$191M inaugural offering sees strong investor interest; company says it plans to package more HELOCs alongside Non-QM securitizations

May 15, 2025
DOJ Opens Criminal Investigation Into NY AG Letitia James Over Mortgage Fraud Claims

Investigation follows April referral by FHFA Director Bill Pulte; potential charges include wire, mail, and bank fraud

May 09, 2025
Origination Volume Up, But Rocket Sees GAAP Net Loss Of $212M For Q1 2025

Company highlights strength of strategic acquisitions, integrations, product innovations as it furthers its mortgage ecosystem

May 09, 2025