Freddie: Equity-to-Cash Conversions Lowest in 16 Years

Giving homeowners more reason to refinance their loans, third-quarter results show that a majority of borrowers who exchanged their fixed rates for today's low rates on first-lien mortgages either saved big on principal or kept their current payments.

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""Freddie Mac"":http://www.freddiemac.com/ released a refinance results analysis from the past few months that reveal hefty savings for those who chose to refinance and had the eligibility to do so.

Of the 82 percent of borrowers who refinanced their first-lien mortgages, 37 percent of homeowners substantially reduced their principal balance by paying in. The GSE said 44 percent maintained their original monthly loan amounts by refinancing.

""Savvy homeowners are taking advantage of some of the lowest fixed-rates in more than 60 years to lock in interest savings,"" ""Frank Nothaft"":http://www.freddiemac.com/bios/exec/nothaft.html, Freddie's VP and chief economist,

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said in a statement.

The survey found that borrowers who upped their loan balance by about five percent ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô otherwise termed ""cash-out"" borrowers ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô accounted for 18 percent of all refinancing activity.

This is much less than their share of refinancing activity between 1985 and 2010, which held at 46 percent during that time frame.

In net dollars, home-equity conversions for cash hit a new 16-year low over the third quarter, according to the survey. Homeowners pooled about $5.3 billion in net home equity, cashed by those who refinanced their conventional prime-credit loans.

This was less than $6.3 billion seen for the same figures over the second quarter, and even more so for those who cashed their refinance volume at a peak of $83.7 billion over the same tame five years ago.

Interest rates for the 30-year fixed-rate mortgage fell on average by about 1.2 percentage points, reflecting a reduction by 22 percent overall. Collateral property underwent a median value change by a negative 7 percent over the five-year lifespan of a prior loan.

The GSE said that borrowers with a $200,000 mortgage could cut back $2,500 in interest owed on monthly loan payments.

""The typical borrower who refinanced reduced their interest rate by about 1.2 percentage points,"" Nothaft added. ""On a $200,000 loan, that translates into saving $2,500 in interest during the next 12 months.""