MAY 31, 2000
CONTACT: corprel@freddiemac.com
or (703) 903-3933

FREDDIE MAC QUARTERLY SURVEY FINDS REFINANCING MARKET CONTRACTING IN THE FIRST QUARTER OF 2000

Refinancing Drops Off As Mortgage Rates Climb

McLean, VA  – Freddie Mac announced today that, according to its quarterly refinancing survey, approximately 20 percent of conventional mortgage applications in the first quarter of 2000 were for refinancing, down from 22 percent in the fourth quarter of 1999. In contrast, nearly 60 percent of conventional applications were for refinance in the first quarter of 1999.

“During the first quarter of this year, fixed-rate mortgage rates continued to climb, making refinancing less attractive than in the recent past, when interest rates were considerably lower,” said Vassilis Lekkas, principal economist for Freddie Mac. “In such an environment, the 15-year product is less popular and we have indeed seen the portion of refinancings into 15-year product decline significantly during the last two quarters.”

“Given the continuing increase in the 30-year mortgage rate, refinancing could dwindle to even lower levels in the coming months.”

The survey found that refinancing into the 30-year fixed-rate mortgage (FRM) lessened slightly in the first quarter of 2000 from the fourth quarter 1999, among all other products surveyed. The survey also found that 63 percent of borrowers originally holding 30-year fixed-rate mortgages who decided to refinance stayed with the same product, compared to 65 percent in the fourth quarter of 1999, and 59 percent in the first quarter of 1999.

The survey revealed as well that 29 percent of borrowers originally holding 30-year FRMs decided to refinance into 15-year loans, increasing very slightly from 28 percent in the fourth quarter 1999 and not much lower than 31 percent in the first quarter of 1999.

Of borrowers refinancing 15-year FRMs during the first quarter 2000, 52 percent opted to stay with the same product, falling from 62 percent in the fourth quarter 1999, and 76 percent in the first quarter of 1999. Additionally, 39 percent of those with 15-year mortgages refinanced into a 30-year product, up from 33 percent in the previous quarter and also rising from 21 percent in the first quarter of 1999.

The Freddie Mac study, which looks at loans homeowners choose when refinancing, is based on properties for which Freddie Mac purchased both the original and new loans.

Freddie Mac is a stockholder-owned corporation chartered by Congress in 1970 to create a continuous flow of funds to mortgage lenders in support of homeownership and rental housing. Freddie Mac purchases mortgages from lenders and packages them into securities that are sold to investors. Over the years, Freddie Mac has opened the doors for one in six homebuyers and two million renters across America.

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