Cash-out refinancings hit a 26-year low in the fourth quarter as 85% of borrowers maintained the same loan amount or reduced their principal balance after refinancing, according to a new report by Freddie Mac.

Only 15% of borrowers walked away from the closing table with cash in their pocket greater than 5% of the loan amount, the fourth quarter report says.  And only $5.5 billion was cashed out – the lowest amount in 16 years.

The secondary market agency noted that the median age of the loans refinanced was 3.7 years and median decline in the value in the properties was 4%.

Freddie's internal house price index has registered a 23% decline between September 2007 and September 2011. "Thus, borrowers who refinanced in the fourth quarter owned homes that had held their value better than the average home," the secondary market agency said.

Due to declining mortgage rates, which averaged 3.96% in December, the typical borrower lowered their interest rate by 1.4 percentage points in the fourth quarter.  That translates into $2,700 in savings over the next 12 months for a borrower with a $200,000 loan. 

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