Posted on May 18, 2010
Filed under On Choosing Fixed vs ARM
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American homeowners are in love with fixed rate mortgages.
Homeowners Are Shortening Loan Terms, Abandoning ARMs
According to a Freddie Mac report of its own mortgage holdings, homeowners that refinance their mortgages are pouring into fixed rate products, regardless of whether their original mortgage was an ARM or a fixed-rate product.
Fixed rate mortgages accounted for 95% of all Freddie Mac-refinances in Q1 2010.
Some other interesting refinancre statistics:
- 25% of homeowners with a 30-year fixed refinanced into a shorter-term mortgage
- 58% of homeowners with a 20-year fixed refinanced into a shorter-term mortgage
- 0% of homeowners with a 15-year fixed refinanced into an ARM
And, speaking of ARMs, the most astounding fact from Freddie Mac is that just 8 percent of ARM-holders opted to refinance into a new ARM.
Considering how favorable ARM pricing has been since the start of the year, and how nearly every Freddie Mac ARM-holder’s mortgage rate has adjusted lower since 2007, the tendency of ARM-holders to move into fixed rate loans says a lot about the American homeowner’s psyche.
Homeowners are opting for payment predictability over payment savings.
Fear is beating frugality.
Everywhere You Look, Mortgage Money Is Cheap
Short-term uncertainty within global financial markets has created interesting choices for refinancing homeowners.
Normally, at this time of year, mortgage rates are just starting their summer pilgrimage towards 6.5 percent. This year, however, the combination of low inflation, a strengthening U.S. dollar, and nascent concerns of a global banking meltdown has pushed investors toward the mortgage-backed bond market.
ARMs are as low as they’ve ever been, the 15-year fixed rate money is near 4 percent and the 30-year fixed is back to all-time lows.
Everywhere you look, mortgage money is cheap.
