Borrowers increasingly paying down mortgage debt
February 2, 2011 - Low mortgage rates have not only encouraged many consumers to pack their moving boxes, but have also pushed others into refinancing their home loans.
According to a new report from Freddie Mac, more borrowers than ever are paying additional cash at the closing table in order to work down their debt even further. The government-sponsored entity reported cash-in refinances made up 46 percent of all refinanced loans during the fourth quarter of 2010, its highest share since the company began tracking the data in 1985
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Comparatively, cash-out borrowers - those who converted some of their home equity into cash when refinancing - represented just 16 percent of refinances, the lowest share on record.
Analysts said the report could show borrowers around the country are committing to paying down their debt and maintaining solid credit scores.
"Consumers are generally shedding debt, and mortgages are just another way they’re doing it," said Frank Nothaft, the group's vice president and chief economist. "Between 2007 and the third quarter of 2010, mortgage debt declined more than $400 billion," he added, citing data from the Federal Reserve.
Despite rising in recent months, mortgage rates remain largely affordable for those making relocation plans or looking to refinance their loan. According to Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage is 4.8 percent.
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