In the final quarter of 2000, 78 percent of Freddie Mac-owned loans that were refinanced resulted in new mortgages for amounts at least five percent higher than the original mortgages. This is comparable with the fourth quarter of 1999, when mortgage rates were also below 8 percent as they are now, but down from the third quarter of 2000, when 82 percent of refinancings were at least five percent higher than the existing mortgage loan.
"This is a direct result of the interest rate environment, which motivated a larger number of borrowers to refinance primarily to take advantage of lower rates rather than to take cash out of the property," said Vassilis Lekkas, principal economist for Freddie Mac.
Lekkas expects the portion of refinancings leading to higher loan amounts in 2001 to continue to decline as refinancing volume increases. Freddie Mac also projects that the number of refinanced mortgages will comprise the majority of mortgage originations this year. Freddie Mac’s quarterly review also showed that the median age of the refinanced loan was 4.9 years, and the property had appreciated 28 percent over that time.
The Freddie Mac survey does not track the use of funds made available from these refinances.