Adjustable-loan holders switching

West Roxbury resident Jay Russo had a choice: Hang on to his adjustable-rate mortgage, which has a very low rate that could rise dramatically next year, or refinance into a sure thing, a fixed-rate mortgage that will cost more now but will remain stable over the life of the loan.

Russo, who purchased his family's home in 2004, said he preferred paying the additional $300 to "the agita of picking up the paper every month and seeing the interest rates go up and down."

On Friday, he expects to close on a $412,000 mortgage with a 5.75 percent rate for 30 years, replacing a three-year, adjustable loan, which has a 4.5 percent rate that could increase in August. Russo, a development associate for the Trammell Crow Residential real estate firm, and his lender at Summit Mortgage watched the rates like hawks, and he jumped in early this month to lock in his rate.

With rates on 30-year mortgages in steady decline from a 6.8 percent high in July, Massachusetts lenders report homeowners are taking advantage of an opportunity to refinance and convert unpredictable variable-rate mortgages into fixed-rate payments. The surge in refinancing makes homes more affordable in one of the most expensive housing markets in the nation.

Higher interest rates on adjustable mortgages are one factor driving the rise in foreclosure proceedings this year. Many homeowners who signed the loans a few years ago are now facing sharply rising payments, because their low introductory rates ended after the first three or five years of the loan and began to rise with interest rates earlier this year.

"Keeping rates low keeps the foreclosure rates from escalating dramatically," said Timothy Warren, chief executive of Warren Group, a Boston real estate publishing and research firm.

Homeowners with typical adjustable-rate loans can expect their rates to increase to about 7.5 percent the next time the rate is reset, according to Michael Fratantoni, senior economist at the Mortgage Bankers Association. The average national rate on a 30-year fixed mortgage is 6.1 percent. Each percentage point decrease in a mortgage rate translates into about $1,900 in annual savings on a $250,000 mortgage.

Refinancing activity is not expected to return to the frenzy of 2003. But lenders said more Massachusetts homeowners are rushing to refinance in December, typically a slow month. As fixed mortgage rates have come down, the gap between what lenders charge for them and for adjustable mortgages has narrowed, making fixed rates more attractive.

"We're definitely seeing a pickup in refinancings," said chief executive Rick Fedele of Boston-based Summit Mortgage. "We're mostly seeing people that in the last 12 months had purchased a home" or "purchased or refinanced four years ago and took a three- or five-year adjustable" loan, he said.

Summit's refinancings surged to about half of all mortgages, with the other half for home purchases -- that's up from a one-third share for refinancings during most of the year.

Steve Adamo, chief executive of CCO Mortgage Corp., the lending subsidiary of Citizens Financial Group, said a "small increase" in refinancing volume is occurring in Massachusetts compared with the third quarter. Danvers-based Mortgage Network Inc. said customers refinancing to a lower rate make up 20 percent of total loan volume currently, up from 11 percent in the third quarter.

In Arlington, Leader Bank said that mortgage loans rose from $20 million to $25 million per month, on average, to $30 million to $35 million in November and December. Many are refinancing an equity line and primary mortgage and rolling them into a new 30-year, fixed mortgage, said Leader's chief executive, Sushil Tuli.

"They can consolidate and bring their rate down to the 6 percent range," he said. "It's in the consumer's interest to do that."

Kimberly Blanton can be reached at blanton@globe.com.