The number of borrowers who refinanced to cash out home equity remained steady during the first quarter, according to Freddie Mac’s quarterly refinance review.

In the first quarter of 2004, 43 percent of Freddie-Mac owned loans that were refinanced resulted in new mortgages at least 5 percent higher in amount than the original mortgages. In the fourth quarter of 2003, 44 percent of refinanced loans had higher new loan amounts.

During the second quarter of 2003, when fixed-rate mortgages were still falling, 33 percent of refinanced loans were for cash out and the number of loans being refinanced was considerably higher.

“Mortgage rates remained low throughout the first quarter of this year but were higher than we saw last summer,” said Frank Nothaft, Freddie Mac chief economist. “With mortgage rates above the 46-year low of last June, the refinance volume is less than last summer’s. The share of cash-out refis tends to rise when overall refinancing activity slows down because fewer borrowers find it economical to refinance their mortgages simply for a lower rate, but the cash-out alternative may be a very affordable option.”

Freddie Mac expects growth in real gross domestic product to be about 4.7 percent, and for the core inflation rate, excluding food and energy components, to remain low. It also expects slightly higher mortgage rates in the second quarter to reduce refinance activity, but that the housing market overall should have a strong year with 30-year, fixed mortgage rates hovering near 6 percent.

“Over the first quarter of 2004, homeowners who refinanced their mortgages lowered their rate on average 1 percentage point,” Nothaft said. “On an average loan size of $150,000, that lower rate translates into a payment that is about $100.00 a month lower for a savings of more than $1,200 annually.”

The review also revealed that properties refinanced during the first quarter experienced a median house-price appreciation of 6 percent during the time since the original loan was made, slightly slower than the 7 percent appreciation rate for loans refinanced in the first quarter of 2003.

Freddie Mac is a stockholder-owned corporation that purchases mortgages from lenders and packages them into securities that are sold to investors.


Send tips, feedback or a letter to the editor to or call (510) 658-9252, ext. 140.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription