Although the volume refinances continues to fall, borrowers who refinanced during the latest quarter are still expected to save more than $20 billion over the next year.
Borrowers who refinanced in the fourth quarter cut their interest rates by an average of 150 basis points and are expected to save around $21 billion during the next 12 months.
On just transactions processed through the Home Affordable Refinance Program, the average rate reduction was 170 BPS.
The findings were reported by Freddie Mac in its fourth quarter 2013 quarterly refinance analysis.
Cashouts accounted for around 17 percent of fourth-quarter refinances. The low came in the second quarter of 2012, when cashout share was around 12 percent.
Conventional prime refinances completed in the final three months of last year included $6.5 billion in cashouts.
The level of equity extraction was low on a historical basis. For instance, the peak was $84 billion cashed out in the second-quarter 2006.
“Adjusted for inflation, annual cashout volumes during 2010 through 2013 have been the smallest since 1997,” the report said.
Loans terms were shortened in 39 percent of fourth-quarter refinances — the highest share since 1992.
When HARP loans are excluded, the share with shorter terms jumped to 42 percent. The share was 35 percent for HARP refinances.
Most of the latest period’s refinances — more than 95 percent — were fixed rate.
“Our latest refinance report shows the refinance boom continued to wind down as the pool of potential borrowers declined and as mortgage rates increased during the second half of 2013,” Freddie Mac Chief Economist Frank Nothaft said in the report. “We are projecting the refinance share will be just 38 percent of all originations in 2014 as refinance falls off further and the emerging purchase market consumes a bigger piece of the pie.”
