Most Homeowners Opt For Fixed-Rate Refinance Mortgages

October 4, 2009

Homeowners seeking a refinance mortgage are choosing a fixed-rate loan, as opposed to an adjustable-rate mortgage, in almost every case. About 99 percent of owners who originally had a conforming adjustable-rate mortgage (ARM) are now applying for a fixed-rate refinance loan, according to a report from Freddie Mac, a major buyer of existing home mortgages.

While 30-year fixed-rate mortgages continue to be preferred by home buyers, the shorter 15-year loan is preferred by most owners applying for a refinance loan. "When interest rates hit very low levels for fixed-rate mortgages, borrowers often take this opportunity to lower their interest rate and shorten their loan term," said Frank Nothaft, Freddie Mac’s chief economist.

"Both refinancing borrowers and families buying homes are shying away from ARMs in the current environment. The small benefit from the lower rate of an ARM loan is not enticing enough to cover the risk that rates will rise in the future from today’s historic lows," Nothaft said.

Posted in Lending, Real Estate