Homeowners go for shorter loans

WASHINGTON, Aug. 15 (UPI) -- Nearly 40 percent of U.S. homeowners refinancing in the second quarter chose shorter loans, the Federal Home Loan Mortgage Corp. said Monday.

Freddie Mac said 37 percent of those people off 30-year loans in a refinancing deal in the quarter chose a 15- or 20-year loan. It was the highest portion of borrowers choosing shorter loans since the third quarter of 2003.

In addition, 55 percent of refinancing homeowners in the quarter with adjustable rate mortgages chose to go with a fixed-rate contract, Freddie Mac said.

While the U.S. Federal Reserve continues to offer historically low interest rates, refinancing consumers are still trimming their expenses.

Fixed-rate loans accounted for about 95 percent of of all refinance loans in the second quarter. People with fixed-rate loans also tend to prefer them over adjustable-rate loans.

"Compared to a 30-year fixed-rate mortgage, the interest rate on 15-year fixed was about 0.8 percentage points lower during the second quarter. For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term," said Frank Nothaft, Freddie Mac vice president and chief economist.