DOW JONES NEWSWIRES
Half of all homeowners who refinanced their mortgage in the
second quarter saw their rate drop at least 20%, saving them some
$3.4 billion the next year, according to Freddie Mac.
Interest rates reached historic lows earlier this year as the
U.S. economy reached at least a near-term bottom. At the same time,
the Federal Reserve began at the start of 2009 to purchase mortgage
securities in hopes of driving mortgages rates down.
Freddie Mac said in its quarterly refinance report, released
Thursday, that the average new loan in the latest quarter was 1.25
percentage points below that of the prior mortgage.
While rates are up slightly from the lows hit in April, Freddie
chief economist Frank Northaft anticipates more than half of
mortgages the rest of the year to be refinances "as long as rates
stay near their current levels of 5.25%"
Meanwhile, those who refinanced and wrapped a second-lien loan
such as home-equity financing into the new mortgage were pulling
out less equity of their homes. Freddie said the share of
refinancings which resulted in new loan amounts at least 5% higher
than the paid-off second-lien fell to a six-year low of 38%. Such
"cash-out" mortgages was 43% in the first quarter and banks have
been much tougher of late in letting homeowners tap additional
amounts of their home's equity.
Overall, cash-out volumes are down 35% from a year earlier.
-By Kevin Kingsbury, Dow Jones Newswires; 212-416-2354;
kevin.kingsbury@dowjones.com