Refinance Rates: Savings of 0.9 Points in 1st Quarter

Mortgage ratesHalf of borrowers who refinanced their mortgages in the first quarter lowered their interest rate by at least 16 percent – or 0.9 percentage points or more below the old rate, according to Freddie Mac’s quarterly Refinance Report.
About $9 billion in home equity was cashed out by homeowners when they refinanced their conventional home mortgage, the smallest quarterly inflation-adjusted amount in ten years – since the third quarter of 2000.
Moreover, the cash-out shares over the last two quarters have been the lowest since Freddie Mac started reviewing the refinance market in 1985.
“Refinances were about three-fourths of originations during the first quarter,” said Frank Nothaft, Freddie Mac vice president and chief economist. “In total, the lower rate translates into about $2 billion in interest savings for these borrowers over the first 12 months of the new loan,”  
Freddie Mac also reports that 72 percent of borrowers who refinanced kept their loan balance mostly unchanged or reduced their loan balance outstanding as a result of the refinance.
Those who “cashed-in” to lower their balance represented 18 percent of all borrowers who refinanced in the first quarter.
“Cash-out” borrowers who increased their loan balance by at least 5 percent made up 28 percent of all refinance loans.
Refinance applications have been decreasing steadily since late March as home purchase mortgage applications have sharply increased, primarily as a result of the looming deadline for the homebuyer tax credits of up to $8,000.
The tax credits for firsts-time and repeat buyers, which were extended in November, are set to expire to expire tomorrow for closings before June 30.
The Mortgage Bankers Association reported yesterday that its Refinance Index decreased 8.8 percent last week, compared to the previous week. Its four-week refinance moving average is down 5.8 percent.
However, the mortgage Purchase Index increased 7.4 percent last week, compared to the previous week.
“Purchase activity continues to increase as we approach the end of the homebuyer tax credit program,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.  “Purchase applications were up almost 9 percent from a month ago, with a disproportionate share of the increase due to government purchase applications.”
Government applications for purchasing a home accounted for almost 49 percent of all purchase applications last week, Fratantoni said.

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