More property owners in the US are taking on short-term loans following the decline in mortgage rates.
The latest survey by Freddie Mac revealed that traditional 30-year fixed-rate loans fell for the fifth consecutive week to 3.75 percent from last week’s 3.78 percent.
In addition, the survey showed that average rates for 15-year fixed mortgages slipped from 3.04 percent last week to 2.97 percent, making it the first sub-three percent reading in almost 21 years since Freddie started tracking the 15-year loan.
With the housing market in trouble, refinancers are benefiting from the lower rates. The Mortgage Bankers Association (MBA) said that less than a quarter of mortgages were used recently to purchase homes.
This is in contrast to the small number of refinancers who took up short-term mortgages during the housing boom.
Richard T. Cirelli, President of RTC Mortgage Corp, a loan brokerage firm, said “people were getting 30-year interest-only loans, and they were pulling out all the cash they could”.
“Now it’s just the opposite — they want shorter-term loans, and they’re strategising to get the mortgage payoff to coincide with their retirement,” he said. “We’re seeing 20-year loans, 15-year loans and even quite a few 10-year loans.”
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