Industry News

Fewer borrowers cash out real estate equity

Home-price appreciation slows in fourth quarter

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Fifty-six percent of Freddie Mac-owned loans that were refinanced in the fourth quarter resulted in new mortgages at least 5 percent higher in amount than the original mortgages, according to Freddie Mac's quarterly refinance review. This is in contrast to the third quarter of 2004, when 59 percent of refinanced loans had higher new loan amounts. "The dip in 30-year fixed mortgage rates that happened in the fourth quarter brought down the cash-out share of new refinancings even though the total share of refis went up," said Frank Nothaft, Freddie Mac vice president and chief economist. "When homeowners decide to refinance because of falling interest rates, they might take cash out of home equity because it is convenient, but it is not the main reason they are seeking a new loan. As interest rates rise over this year we should see higher cash-out shares among refi loans but total dollars cashed-out should be lower than in 2004." Freddie Mac expects growth in U.S. Gross Domestic Prod...