Mortgage refinancing declined during the second quarter as interest rates rose, Freddie Mac said last week.
The number of refinance applications peaked in February, at 47 percent of all loans. But by June, refinance applications had plummeted to 19 percent of all loans, the Federal Home Loan Mortgage Corp. said in a quarterly study.
"That was not unexpected given the volume of refinancings in the December-through-February period, and the fact that interest rates on all mortgages were higher in the second quarter," said Vassilis Lekkas, senior economist.
Mortgage originations overall have remained strong, totaling $414 billion in the first half, compared with $264 billion in the first half of 1995, he said.
As interest rates rose over the 7 percent range during the second quarter, the percentage of borrowers refinancing from 30-year loans into new 30-year loans dropped to 53 percent, from 63 percent in the first three months of the year.
But rising rates -- which increased more dramatically for long-term mortgages -- made the lower-rate adjustable loans more attractive. The percentage of borrowers with adustable loans refinancing to new adjustable loans doubled in the second quarter, from 7 percent to 14 percent.
The study is based on mortgages for which Freddie Mac purchased both the original and new loans. Freddie Mac buys mortgages from lenders and packages them into securities to sell to investors.
Pub Date: 8/18/96
Fewer refinance mortgages as rates rise in 2nd quarter