CORRECT:=Half Of 2Q Mortgage Refis Cut Rate At Least 20% -Freddie

("=Half Of 3Q Mortgage Refis Cut Rate At Least 20% -Freddie" at 1:48 pm EDT incorrectly stated the quarter in the headline. A corrected version follows.)

 
  DOW JONES NEWSWIRES 
 

Half of all homeowners who refinanced their mortgage in the second quarter saw their rate drop at least 20%, saving them some $3.4 billion the next year, according to Freddie Mac.

Interest rates reached historic lows earlier this year as the U.S. economy reached at least a near-term bottom. At the same time, the Federal Reserve began at the start of 2009 to purchase mortgage securities in hopes of driving mortgages rates down.

Freddie Mac said in its quarterly refinance report, released Thursday, that the average new loan in the latest quarter was 1.25 percentage points below that of the prior mortgage.

While rates are up slightly from the lows hit in April, Freddie chief economist Frank Northaft anticipates more than half of mortgages the rest of the year to be refinances "as long as rates stay near their current levels of 5.25%"

Meanwhile, those who refinanced and wrapped a second-lien loan such as home-equity financing into the new mortgage were pulling out less equity of their homes. Freddie said the share of refinancings which resulted in new loan amounts at least 5% higher than the paid-off second-lien fell to a six-year low of 38%. Such "cash-out" mortgages was 43% in the first quarter and banks have been much tougher of late in letting homeowners tap additional amounts of their home's equity.

Overall, cash-out volumes are down 35% from a year earlier.

-By Kevin Kingsbury, Dow Jones Newswires; 212-416-2354; [e-mail]