Homeowners switch to fixed-rate mortgages

MCLEAN, Va., Aug. 13 (UPI) -- U.S. homeowners who refinanced their mortgages overwhelmingly switched to fixed-rate mortgages, U.S. mortgage-finance giant Freddie Mac said Monday.

Between April and June, 85 percent of borrowers who originally had one-year adjustable-rate mortgages, and 86 percent of borrowers who initially had hybrid adjustables, changed to fixed-rate loans, Freddie Mac said.

The comparable numbers in the first quarter were 89 percent and 88 percent, respectively, the government-sponsored enterprise formally known as the Federal Home Loan Mortgage Corp. said.

“Mortgage rates on 30-year fixed-rate loans went up in the second quarter to 6.4 percent, while rates on one-year Treasury-indexed ARMs were 5.5 percent,” Deputy Chief Economist Amy Crews Cutts said.

Even though most borrowers still preferred fixed-rate mortgages, “the widening spread between fixed- and adjustable-rate mortgages in the second quarter made ARMs a bit more attractive than they had been,” she said.

One-year ARMs usually carry low initial rates the first year and adjust annually after that.

Hybrid ARMs sometimes offer extremely low rates for the first two years and then adjust every six months after that, frequently ballooning.