Low rates continue to fuel refinancings of home mortgages

REAL ESTATE WATCH

May 26, 2002

Low mortgage rates continued to fuel refinancing among homeowners in the first quarter of this year, according to Freddie Mac's quarterly finance review.

The report indicates that 61 percent of loans the federally chartered company owns were refinanced in loan amounts at least 5 percent higher than the original mortgages, compared with 51 percent in the first quarter of 2001.

"Mortgage rates remained very low and very affordable during the first three months of this year, slipping below 7 percent, to make refinancing an attractive option," said Frank Nothaft, chief economist with Federal Home Mortgage Corp.

On average, homeowners who refinanced during the first quarter cut more than one percentage point from their original loan. The average value of homes grew by more than 7 percent nationally over the past year, encouraging homeowners to borrow part of the accrued equity, said Nothaft.

The cumulative growth in the value of housing has been 37.1 percent over the past five years nationally. Freddie Mac economists forecast an annualized growth rate of 3 percent for the rest of this year, a figure slightly lower than in previous years due to the mild recession.

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