Freddie Mac released its quarterly refinance review for the fourth quarter of 2005 last week and reported that 80% of Freddie-owned loans that were refinanced resulted in new mortgages with loan amounts at least 5% higher than the original loan. This compares to 73% in the third quarter, and is at its highest level since the third quarter of 2000 when it was at 81%.

Freddie Mac's chief economist Frank Nothaft said that while mortgage rates increased sharply in the fourth quarter, most borrowers were extracting home equity rather than trying to reduce monthly payments. One major reason for this, he said, is homeowners are consolidating their home equity loan payments that have been increasing as a result of the Federal Open Market Committee rate hikes.

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