“Many homeowners took advantage of low mortgage rates by refinancing in the first quarter of 2015,” said Len Keifer, deputy chief economist for Freddie Mac. “Relatively younger loans refinanced as the median age of a refinanced loan declined to 5.6 years, down from 6.8 years in the prior quarter. Refinance borrowers are primarily looking to reduce payments and pay down principal faster. We estimate that borrowers who refinanced in the first quarter will save on net more than $1.4 billion in interest payments over the first 12 months of their new loan. Nearly a third of borrowers who refinanced shortened their loan term.”
The average interest rate reduction for a refi in the first quarter was about 1.2 percentage points. That translates to about $2,500 in savings over 12 months on a $200,000 loan. Homeowners who refinanced through HARP
saw an average of $3,500 in savings on interest over 12 months.
More than 95% of refinancing borrowers chose a fixed-rate loan, according to Freddie Mac. Fixed-rate loans were preferred regardless of what the original loan had been. For instance, more than three-quarters of borrowers who had a hybrid adjustable rate mortgage refinanced into a fixed-rate loan, while only 3% who started with a fixed-rate loan chose an ARM.
Lower mortgage rates led to a boost in refinance activity in the first quarter, according to data released Thursday by Freddie Mac.