U.S. Refinancings Up in First Quarter

A greater number of U.S. homeowners refinanced their mortgage loans to squeeze some equity from their homes in the first three months of this year, according to Freddie Mac, one of the nation’s largest providers of housing finance.

Of the loans that were refinanced in the first quarter, 61% were cash-out refinances, up from last year’s first-quarter levels of 51% and the fourth quarter’s 48%.

Low loan rates and rising home prices spurred these refinancings and allowed consumers to shore up their household finances. The ability to refinance has buttressed spending in an economy that is struggling to rebound from recession.

“Refinancings last year and early this year probably did have a positive effect on the economy,” said Robert Van Order, an economist at Freddie Mac.

In some cases, borrowers even took on a slight increase in monthly mortgage payments to get money from cash-out refinancings.

Van Order said home prices have risen over the last five years at a pace exceeding inflation. “So, these are real gains” in home values, he said.

Freddie Mac said it expects 30-year mortgage rates to linger at around 7% through spring.

The government agency also reported that the median age of a loan being refinanced was 3.8 years in the first quarter of 2002, more than double the median age of loans in the first three months of 2001. Freddie Mac also said only about 11% of the mortgages refinanced in the first three months of this year had lower new loan amounts.

Freddie Mac said the median house price rose 17% since the mortgage was first underwritten, up from 11% in the first quarter of 2001.