While refinancing as a share of overall mortgage activity continues to decrease as rates rise, Americans who do refinance continue to liberate home equity to pay for home improvements, bill consolidation, consumer purchases and other discretionary spending.

Freddie Mac reported on February 8 that 80 percent of its owned loans that were refinanced during the fourth quarter of last year were for loan amounts that were a minimum of five percent higher than the loans that were replaced. At the lower level the increase might be accounted for by the need or desire to wrap points and fees into the final loan amount. This would be particularly true of higher risk loans where poor credit or marginal equity would require higher fees. In the third quarter 73 percent of refinanced loans resulted in cash out and the recent fourth quarter, figures are the highest since the third quarter of 2000 and, in fact, are near the highest this century. Since the beginning of 2000 cash out loans of this nature have ranged from a low of 33 percent in the second quarter of 2003 to a high of 81 percent the very next quarter.

Publish Date: 02/10/2006