Freddie Mac reported that during the third quarter of 2005, 72% of Freddie-owned loans were refinanced into new mortgages with loan amounts that were at least 5% more than the original loan balances. While this percentage is unchanged from the second quarter, it represents an increase from the 64% level in the first quarter.

Freddie Mac's Chief Economist Frank Nothaft said the sharp increase in the cost of home equity lines of credit and expectations of even higher rates in the near future induced homeowners to tap into their home equity. Freddie Mac Deputy Chief Economist Amy Crews Cutts expects refinance volume overall to slow down while cash-out refis continue to be in demand, adding that equity extraction through refinancing should top $200 billion this year, declining to $114 billion in 2006.

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