Homeowners who refinanced during the first quarter again "overwhelmingly" chose fixed-rate loans, regardless of whether their original loan had a fixed or adjusted rate, and shorter-term mortgages gained some favor, Freddie Mac said Wednesday.
More than 95% of refinanced loans during the quarter were fixed rate, as interest rates on such mortgages remained historically low.
Though many homeowners are drawn to the stability of constant mortgage principal and interest payments on fixed-rate mortgages, Freddie Chief Economist Frank Nothaft said many borrowers are choosing shorter-term mortgages — 15 or 20 years — instead of 30 as they look to pay down their balances faster.
During the period, one-quarter of borrowers who had 30-year fixed-rate loans refinanced into a 15- or 20-year one, the largest percentage shortening their term in 5 and a half years. Of refinancers who had 20-year loans, 34% changed to 30-year mortgages, 8% stuck with a 20 year and 58% cut down to a 15-year loan, according to data from Freddie.
For borrowers refinancing a 15-year mortgage, 25% chose a 30-year loan, 2% switched to a 20 year, 72% did another 15-year one and 1% moved into an adjustable-rate mortgage hybrid.