Cash-out refinances were up 68% year-over-year from the second quarter of 2014, as borrowers take advantage of still-low rates and newfound equity in their homes, according to Black Knight Financial Services.
This is the highest volume of cash-out refinancing in five years, but still nearly 80% below the peak in 2005.
As Black Knight Data & Analytics Senior Vice President Ben Graboske explained, borrowers have been capitalizing on increased equity available in their homes and still historically low rates.
“In the second quarter of 2015, we saw cash-out refinance volumes rise almost 70% from the same period last year,” said Graboske. “While this is the highest volume in cash-out refinances we’ve seen in five years, it’s still nearly 80% below the peak in Q3 2005. Even so, it’s clear that borrowers have been capitalizing on the increased equity available to them.
“As we reported in last month’s Mortgage Monitor, total equity of mortgage holders has risen by about $1 trillion over the last year, and ‘tappable’ equity stands at $4.5 trillion,” he said. “Borrowers today are pulling out an average of $67,000 of equity through cash-out refis, nearly the levels we saw back in 2006. What’s really interesting though, is that even after pulling out that equity, resulting average LTVs are at 68%, the lowest level we’ve seen in over 10 years.”
In its analysis of refinance transactions in comparison to prior loans, Black Knight also found that the distribution of cash-out refinances is highly concentrated geographically, with over 30% of all such transactions occurring in California alone.
Texas is second among states in terms of cash-out refinance volume, at just 7% of the nation’s total. Looking at Q2 2015 refinances in general, the data shows that borrowers are saving an average of $136 in principal and interest each month through refinance and cutting their interest rates by just over one%; the lowest such reductions in nine and five years, respectively.