Borrowers who refinanced their conventional conforming mortgages in the third quarter cut their payments by a collective $3 billion over the first year of the loan, according to Freddie Mac.
The mortgage financier said half of those who refinanced their loans lowered their annual interest rate by 17 percent.
The average interest rate post refinance was about 1.1 percentage points below the old rate, thanks to the record low mortgage rates on offer.
“Homeowners are benefiting from an extended period of very low interest rates,” said Frank Nothaft, Freddie Mac vice president and chief economist, in a statement.
“In the first nine months of 2009, interest rates on 30-year fixed-rate mortgages have averaged 5.1, the lowest such average in the 38-year history of Freddie Mac’s Primary Mortgage Market Survey.”
Cash Out Refinancing Hits Six Year Low
Meanwhile, cash out refinances hit a six-year low, with such transactions accounting for just 36 percent of the total in the third quarter.
Conversely, rate and term refinances accounted for 64 percent of the total, the highest share in six years.
“In the third quarter, about $20 billion in home equity was cashed out by homeowners when they refinanced their conventional prime-credit home mortgage,” said Amy Crews Cutts, Freddie Mac deputy chief economist.
“Over the first three quarters of this year, the aggregate amount cashed out has been approximately $60 billion.”
That’s the lowest amount of equity extraction over the first three quarters of a year since 2000, a clear sign that equity has slipped away.