A recent Freddie Mac survey showed 45 percent of borrowers who refinanced from a hybrid adjustable-rate loan during the second quarter transitioned to another hybrid adjustable-rate product. This was the highest hybrid-to-hybrid refinance percentage since 2004.
Frank Nothaft, Freddie Mac vice president and chief economist, said hybrid ARMs are popular for homeowners who plan to move within a few years. He said many borrowers with ARMs chose to refinance to similar loans to take advantage of low second quarter interest rates, which on average were 1.2 percent lower for a hybrid ARM than for a 30-year fixed mortgage.
Despite the high hybrid-to-hybrid refinance rate, fixed-rate loans were more popular overall in the second quarter, accounting for about 95 percent of all refinance activity, according to Freddie Mac. Because interest rates were lower for shorter-term loans, many homeowners switched from a 30-year to a 15- or 20-year fixed mortgage.
The average interest rate was 4.33 percent for a 30-year fixed loan and 2.92 percent for a 5/1 ARM during the second week of August, according to Bankrate.
More News