U.S. cash-out refinancing share rises in third qtr
NEW YORK, Nov 3 (Reuters) - The share of U.S. mortgage refinancing to extract home equity grew in the third quarter from the second quarter when 30-year mortgage rates ran above 6 percent, Freddie Mac (FRE.N: Quote, Profile, Research) said on Wednesday.
In the third quarter, 60 percent of mortgages owned by Freddie Mac were refinanced into larger size loans, compared with 42 percent refinanced loans that had higher loan amounts in the second quarter, the No. 2 buyer of U.S. mortgages said.
Refinancing activity dropped in the third quarter because higher mortgage rates made it less attractive for homeowners looking to save money by lowering rates, Freddie Mac said.
"However, for cash-out refinancers, these low rates were a very cost effective way for them to finance a big project such as home improvements or to consolidate and pay-off consumer debt," said Frank Nothaft, Freddie Mac's chief economist.
Total home equity cashed out in the third quarter totaled $41 billion, up from $28.5 billion in the second quarter, Freddie Mac said.
For 2004, home equity cash-out would reach $118 billion, down from 2003's record total of $139 billion.
Meanwhile, the Mortgage Bankers Association said on Wednesday its seasonally adjusted index on new refinancing applications rose to 2,303.9 for last week from the previous week's 2,233.8, but was below year-ago's 2,319.4.
Interest rates on 30-year fixed-rate mortgages, excluding fees, averaged 5.65 percent last week, up 0.11 percentage point from the prior week but down 0.20 percentage point from a year earlier, the Washington-based group said.