REFINANCES IN SECOND QUARTER REDUCE MORTGAGE PAYMENTS BY $3.4 BILLION IN COMING YEAR

REFINANCES IN SECOND QUARTER REDUCE MORTGAGE PAYMENTS BY $3.4 BILLION IN COMING YEAR

Cashout Refinancing At Lowest Share Since Third Quarter 2003
McLean, VA – In the second quarter of 2009, half of borrowers who refinanced their loan lowered their annual mortgage interest rate by at least 20 percent according to Freddie Mac’s quarterly Refinance Report. The new interest rate was about 1.25 percentage points below the old rate. In aggregate the interest-rate reduction adds up to about $3.4 billion in payment savings for these homeowners over the next year.
"Interest rates for fixed-rate conventional conforming mortgages hit 50-year lows during the second quarter of 2009. In Freddie Mac’s Primary Mortgage Market Survey® rates for 30-year fixed rate mortgages averaged just 5.03 percent over the quarter with 0.7 points, and twice hit an all-time weekly average low of 4.78 percent in April," noted Frank Nothaft, Freddie Mac vice president and chief economist. "A big part of the benefit of refinancing is the lower monthly payment that borrowers enjoy – the payment savings from ‘rate-and-term’ refinancing done during the quarter is about $160 a month on a $200,000 loan. But these borrowers also accumulate principal faster than they would have with a higher-rate loan even after taking into account the longer terms of the new loans. In aggregate, second-quarter refinancers will have about $200 million additional principal paydown after a year than they would have under their old loans.
"Fixed mortgage rates are still very low, although they have climbed up a bit from their April lows. We are anticipating more than one-half of originations to be for refinancing throughout the rest of the year as long as rates stay near…

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