For almost 95% of mortgage borrowers who refinanced in the first quarter, staying in or moving to a fixed-rate product was the goal, according to the latest Freddie Mac quarterly product transition report. Even hybrid adjustable-rate mortgages, which had been a popular option since the middle of 2010 across all types of borrowers who had refinanced, lost market share in the rush to FRMs.
However, almost one-third of hybrid ARM borrowers opted to stay in that product, the lowest percentage of those borrowers electing that option since 1Q11.
By product type, 64% of 30-year FRM borrowers stayed in that product, while 21% went for the 15-year product and 14% for the 20-year.
As for the 20-year FRM borrowers, 68% cut their term to 15 years, while 19% opted to increase it to 30 years.
When it came to one-year ARM borrowers, 60% went for the 15-year FRM. In the past, the majority of this group of borrowers had typically gone for the 30-year FRM. In recent quarters, these borrowers had spread out among the 30-year, 20-year and 15-year products.
Freddie Mac chief economist Frank Nothaft said, "Compared to a 30-year FRM, the interest rate on a 15-year fixed was about three-quarters of a percentage point lower during the first quarter. For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term. Further, under the enhanced Home Affordable Refinance Program, certain risk-based fees are waived for HARP borrowers who refinance into shorter-term loans."
