For Gulf Shores borrowers refinancing mortgages in the fourth quarter of 2011, fixed-rate loans accounted for more than 95 percent of refinanced loans.
Refinancing Gulf Shores borrowers clearly preferred fixed-rate loans, regardless of whether their original loan was an adjustable-rate mortgage (ARM) or a fixed-rate. This news was based on Freddie Mac’s Quarterly Product Transition Report released recently.
Frank Nothaft, Freddie Mac’s chief economist says, “Fixed mortgage rates averaged 4.00 percent for 30-year loans and 3.30 percent for 15-year product during the fourth quarter in Freddie Mac’s Primary Mortgage Market Survey, well below long-term averages.”
The Bureau of Economic Analysis has estimated the average coupon on single-family loans was about 5.2 percent during the fourth quarter of 2011.
An increasing share of refinancing Gulf Shores borrowers chose to shorten their loan terms during the fourth quarter. Of borrowers who paid off a 30-year fixed-rate loan, 43 percent chose a 15- or 20-year loan, the highest such share since the first quarter of 2003.
Fifty-eight percent of Gulf Shores borrowers who had a hybrid ARM transitioned to a fixed-rate loan during the fourth quarter, while the remaining 42 percent chose to refinance into the same type of product.
Gulf Shores Borrowers Can Gain More Savings
Nothaft further commented, “For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term. Compared to a 30-year fixed-rate mortgage, the interest rate on 15-year fixed was about 0.7 percentage points lower during the fourth quarter. And for borrowers who plan to remain in their current home for only a few years, the hybrid ARM allows for even a greater interest-rate savings. The initial interest rate on a 5/1 hybrid ARM was about 1.1 percentage points lower than on a 30-year fixed-rate loan.”