Cash-out refinancing hits peak

Homeowners are tapping their equity at highest rate in 16 years.


NEW YORK (Reuters) -- U.S. homeowners took cash out of their homes in the third quarter at the highest rate in 16 years, spurred by high costs on other types of loans, according to home finance company Freddie Mac (Charts) .

In the quarter, 89 percent of Freddie Mac-owned loans that refinanced got mortgages that were at least 5 percent higher than the original balances.

"High demand for cash extraction through refinance is being driven by the high cost of home improvement loans and home-equity lines of credit -- that is, the cost of alternative financing -- and still-strong demand for home improvements," Amy Crews Cutts, Freddie Mac deputy chief economist, said in a release.

Also, a huge wave of adjustable-rate mortgages created in the past few years are facing their first reset, giving borrowers the incentive to refinance and take additional cash, Freddie Mac said.

The third quarter share of cash-out refinancing is up from 88 percent in the second quarter.



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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.