As the refinancing trend starts easing due to the recent increase in mortgage rates, one interesting tendency that has developed is the growing preference consumers have for mortgages with shorter terms. Chief among these shorter-term mortgages are 10-year loans for pre-retirees, or, in demographic parlance, “baby boomers.”
According to a report from The Miami Herald’s Kenneth R. Harney, a few community banks, including South Windsor, Conn.’s Rockville Bank, have reported 10-year mortgages being more than a “niche option” for consumers. The aforementioned Rockville Bank’s figures show that 10-year mortgages took up about 20 percent of all residential mortgage originations in 2012, in terms of dollar amount.
Harney also pointed out how mortgage buyer Freddie Mac’s analytics revealed that 28 percent of all refinances in the March 2013 ending quarter had borrowers requesting to have their loans shortened. Close to a third of all refinancers with 30-year fixed-rate mortgages requested shorter-term loans, according to Freddie Mac.
While the 15-year home loan is the one most of us see on mortgage rate analytics together with 30-year fixed mortgages, lenders believe that the 10-year mortgage is becoming more and more popular with the baby boomer crowd, most of which are in their pre-retirement years.
Harney opined that interest rates are probably the main reason why more consumers are preferring this type of loan, particularly with the Federal Reserve likely to cut down its mortgage-backed security purchases.
Figures from MyBankTracker.com show 10-year fixed-rate mortgages at just three percent with one fifth of a point; that represents a much lower figure than the present rates for 30-year and 15-year fixed-rate mortgages.