The amount of money U.S. homeowners pulled out of their homes remained at a four-year low in the third quarter as higher mortgage rates cut the number of borrowers who refinanced, Freddie Mac said today.
Homeowners "cashed out" about $99 billion in home equity during the first three quarters of the year, the lowest since the first nine months of 2004, according to the McLean, Va.-based mortgage finance company.
The $99 billion is half the amount taken out of equity over the first nine months of 2007, said Amy Crews Cutts, Freddie Mac deputy chief economist.
About $30 billion in home equity was cashed out through refinancing of loans made to prime borrowers in the third quarter — $10 billion less than the second quarter, she said.
In the third quarter, 78 percent of homeowners who refinanced loans purchased by Freddie Mac cashed out at least 5 percent of their equity.
"Higher mortgage rates during the third quarter reduced the number of borrowers that refinanced solely to obtain a lower interest rate or shorter term," said Frank Nothaft, Freddie Mac vice president and chief economist
Nothaft said borrowers who did refinance wanted to cash-out some of their home equity or to move from an adjustable-rate mortgage to a fixed-rate loan.
Economists watch these numbers closely because it affects consumer spending and investment decisions.
Consumer spending, which accounts for two-thirds of total economic activity, remains under severe strains, as the downturn in home prices, combined with rising food and energy costs, have hurt consumer confidence.
