Industry News

More borrowers tap into home equity

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Borrowers who refinanced during the fourth quarter did so primarily to cash out home equity rather than to secure lower interest rates, according to Freddie Mac's quarterly refinance review. In the fourth quarter of 2003, 45 percent of Freddie Mac-owned loans that were refinanced resulted in new mortgages at least 5 percent higher in amount than the original mortgages. This is in contrast to the third quarter of 2003, when an upwardly adjusted 34 percent of refinanced loans had higher new loan amounts. A year ago, when fixed-rate mortgages were still falling, 40 percent of refinanced loans were for cash out, but the number of loans being refinanced was considerably higher. "The atmosphere around refinancing changed in the fourth quarter as mortgage rates started rising from the 45-year lows of the summer. Since most of those who could refinance for lower rates have already done so, the later-year market became more attractive primarily to those who want or need to take equity out ...