Fixed-rate mortgages remained largely popular with consumers over the third quarter, according to ""Freddie Mac"":http://www.freddiemac.com/, despite the willingness by some lawmakers and policymakers to part ways with the loan product.[IMAGE]
In releasing the Quarterly Product Transition Report, the GSE found that more refinancing borrowers opted to contract their mortgage terms over the course of the second quarter.
""Compared to a 30-year fixed-rate mortgage, the interest rate on 15-year fixed was about 0.8 percentage points lower during the third quarter,"" ""Frank Nothaft"":http://www.freddiemac.com/bios/exec/nothaft.html, VP and chief economist with Freddie, said in a ""statement"":http://freddiemac.mediaroom.com/index.php?s=12329&item=84808. ""For borrowers motivated to refinance by low fixed-rates, they could obtain even lower rates by shortening their term.""
Forty percent of borrowers with a 30-year fixed-rate mortgage exchanged their old products for 15- and 20-year mortgages, topping off the most such since 2003, Freddie found.[COLUMN_BREAK]
Of those homeowners with hybrid adjustable-rate mortgages, 63 percent went for a fixed-rate mortgage over the third quarter, compared with 37 percent who stayed with their original mortgage products.
The decision by many consumers to stay with fixed-rate mortgages or exchange current ones for others shadows discussions among policymakers about the future of the financial product.
In October ""Sen. Richard Shelby"":http://shelby.senate.gov/public/ (R-Alabama) captured headlines by openly questioning whether the 30-year fixed-rate mortgage creates a ""public good"" at a ""Senate Banking Committee"":http://banking.senate.gov/public/ hearing on the future of housing finance reform.
""Is a 30-year fixed-rate mortgage the best option to consume?"" he asked during the hearing. ""Is the pre-payment option included these 30-year fixed-rate mortgages truly free? And what has the subsidy of this product already cost the American taxpayer?""
""These mortgages were never even heard of when we designed the 30-year fixed-rate mortgage back in the 1930s,"" ""Jack Konyk"":http://www.linkedin.com/pub/jack-konyk/17/818/6b1, executive director for government affairs with ""Weiner Brodsky Sidman Kider PC"":http://www.wbsk.com/home.php, told _MReport_ in a past interview.
He cited as alternatives the portable mortgage, which he describes as a financial product capable of relocating to new collateral, and the shorter-term non-fully amortizing loan.
""We need to consider alternatives before we settle on a mortgage vehicle for today's society,"" he added.