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Refinancing Is New Risk Tool.
MCLEAN, VA -- Higher rates and rising energy prices have put pressure on consumers, but many mortgage borrowers are learning to refinance their home loans as a "short-term remedy to competing risks in the economy," Freddie Mac economists said in a recent outlook.
Freddie Mac estimates that $500 billion in first-lien mortgages and $650 billion in second liens are scheduled to adjust this year. In addition, Freddie Mac estimates that $81 billion was cashed out of home equity through first-lien refinancing during the second quarter, up from $74 billion in the first quarter.
Motivated by rising short-term interest rates, homeowners have refinanced to roll consumer debt into cheaper first mortgage debt. Borrowers with adjustable-rate loans have also refinanced in response to upcoming rate adjustments.
Slower economic growth and higher inflation are squeezing the housing sector, Freddie Mac said, since family incomes rise more slowly as interest rates have moved higher.
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Source: HighBeam Research, Refinancing Is New Risk Tool.