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Unless you’ve been living under a rock, you know that mortgage rates are still incredibly low. In fact, Freddie Mac announced that mortgage rates hit their lowest level for 2011, with 30-year fixed-rate averages at 4.63% for the week ending May 12, and 15-year fixed-rate averages at 3.82%.
That low rate comes at a cost, of course: borrowers would pay an average 0.7 point, with 1 point representing 1% of the total borrowed amount.
And for those willing to trade the security of a fixed monthly payment for an Adjustable Rate Loan, or ARM, which initially comes at a fixed rate for a set number of years but resets each year after, rates are even lower.
The details:
1. 30-year fixed-rate mortgages averaged 4.63% with an average 0.7 point; that’s down from 4.71% last week, and 4.93% for the same period last year.
2. 15-year fixed-rate mortgages averaged 3.82% with an average 0.7 point, downfrom 3.89% last week and 4.30% a year ago.
3. 5/1 ARMs (5-year Treasury-indexed adjustable-rate mortgages) averaged 3.41% with an average 0.6 point, down from 3.47% the previous week and 3.95% the prior year.
4. 1-year Treasury-indexed ARMs averaged 3.11% with an average 0.5 point, downfrom last week when it averaged 3.14%, and 4.02% last year.
In a news release, Freddie Mac’s vice president and chief economist Frank Nothaft attributed the decline at least in part to April’s mixed employment report. (While the economy added the highest number of workers in 11 months, the unemployment rate rose to 9%, from 8.8% in March.)
Despite the strong gap between fixed- and adjustable-rate loan rates, it looks like not that many US homeowners were entirely focused on monthly savings when refinancing their existing loans: in a report released Monday, Freddie Mac said that fixed-rate loans accounted for more than 95% of refinance loans.
The vast majority of borrowers who had a hybrid ARM, 84%, chose to refinance into a fixed-rate loan. And a third of borrowers who paid off a 30-year fixed-rate loan, 34%, chose a shorter-term product — a 15- or 20-year loan. That’s the highest such share since the first quarter of 2004, according to Freddie Mac.
