The fixed rate mortgage is king again

After the credit and housing bubble created by Greenspan’s Fed caused people to turn away from fixed rate mortgages, a return to sanity has heralded its return to prominence. A full 70% of mortgages taken out in the first half of 2008 were fixed rate versus merely 53% a year ago.

The return of fixed rate mortgages marks a return to a more normal and safer mortgage market.

Borrowers flocked in record numbers to fixed-rate mortgage products during the second half of 2007, as the nation’s credit crisis cranked into high gear and concerns over more exotic loan programs grew — a trend that seems likely to have continued even more strongly into 2008, based on a review of mortgage application data so far this year.

According to an originations survey released Tuesday by the Mortgage Bankers Association, for first mortgages, fixed-rate loans accounted for 63.6 percent of loans in the second half of 2007, compared to 53.4 percent in the first half of 2007.

Sources told HW that percentage is well over 70 percent so far this year.

Beyond a return to more traditional fixed-rate mortgages, 79.0 percent of all origination dollars were for prime loans compared to 70.0 percent in the first half of 2007, the MBA said. The shift in origination mix underscores the clear depths to which subprime mortgage lending has sunk, after accounting for much of the industry’s growth between 2003 and 2006.

Housing Wire, 30 Jul 2008

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