by Calculated Risk on 11/01/2006 04:16:00 PM

From Reuters: Cash-out refinancing hits 16-yr peak in Q3-Freddie

U.S. homeowners took cash out of their homes in the third quarter at the highest rate in 16 years, spurred by high costs on other types of loans, according to home finance company Freddie Mac.

In the quarter, 89 percent of Freddie Mac-owned loans that refinanced got mortgages that were at least 5 percent larger than the original balances. That compared with 88 percent in the prior quarter and was the highest level since the second quarter of 1990, when it was at 91 percent.

The total amount refinanced, however, fell in the third quarter.
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Homeowners tapped into their home equity for $82.8 billion in cash in the third quarter, compared with a revised $90.6 billion in the prior quarter. The amount could slide below $65 billion in the fourth quarter, according to Freddie Mac.

Homeowners taking less advantage of home equity wealth could have a significant ripple effect on the economy, if consumers borrower and spend less, analysts have said.
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Half of the borrowers who paid off their original loan and took out a larger new one increased their mortgage rate by about 3/8 percentage point, Freddie Mac said.

The median ratio of new-to-old interest rates was the highest since Freddie began compiling the information in 1985.