Freddie: Less homeowners are borrowing from equity

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 Thursday.

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.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.