In the first quarter of 2003, 43% of refinanced Freddie Mac-owned loans resulted in new mortgages. These loans were at least 5% higher in amount than the original mortgages, reported Freddie Mac's quarterly refinance review.
This is compared to the first quarter of 2002, when 60% of refinanced loans had higher new loan amounts, and to the fourth quarter of 2002 when 41% of refinanced mortgages had higher new loan amounts.
In terms of cash-out refinancings, the report also mentioned that last year homeowners converted $96 billion of their home equity into cash. This allowed them, in turn, to support the economy through home improvements, car purchases, and repayment of consumer debt, noted Amy Crews Cutts, Freddies deputy chief economist. She added that so far this year, over $24 billion in equity has been converted. However, this has hardly made a dent in the $6 trillion of equity value held in single-family homes.
Cutts also mentioned that, by reducing their mortgage costs through refinancing, borrowers are saving a little more than $110 a month on average. This adds up in aggregate to about $300 million per month in extra spending money for these homeowners."
Last year, homeowners with conventional, conforming mortgages cashed out $96 billion in home equity. This is in contrast with an estimated $84 billion that was cashed-out and turned back into the economy in 2001.
Freddie's Conventional Mortgage Home Price Index shows the cumulative growth in the value of housing, on a national average, to be about 40% over the past five years. The firm’s economists have revised their forecast to an annualized growth rate of about 5.8% for this year.
The report also showed that properties refinanced during the first quarter 2003 experienced a median house-price appreciation of six percent over the time since the original loan was made, down from 17% for loans refinanced in first quarter 2002.