As home appreciation slows, homeowners with less equity to tap are holding onto their mortgages longer and fewer are risking larger mortgages when they do refinance.

In another sign of the boom-gone-bye-bye times, in the first quarter of 2007, the median appreciation of refinanced property was 24 percent, down from 31 percent a year ago, according to Freddie Mac's Cash-Out Refinance survey of its loans.

The refinanced loan was also older than it was a year ago, 3.3 years on average in the first quarter this year, compared to an average 3 years old a year ago.

Also, 82 percent of Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts that were at least five percent higher than the original mortgage balances. The rate was 86 percent in the first quarter of 2006.

As many homeowners refinanced to stave off rising interest rate on adjustable mortgages, the share of all mortgages for refinance grew slightly from 44 percent in the first quarter 2006 to 46 percent in the first quarter this year, Freddie Mac reported.

For a 30-year conforming loan, average fixed interest rate at the end of the first quarter this year was 6.16 percent, down from 6.35 percent a year ago.

In early May, they were even lower, 6.13 percent in 2007, compared to 6.59 percent in 2006. This year the high was an average 6.34 percent on February 1st, according to Freddie Mac.

The relatively low rates are perhaps the one saving grace in an otherwise flat housing market.

Unfortunately, some homeowners who've fallen on hard times may not find the refinancing they need after a growing number of foreclosures has forced lenders to tighten underwriting standards.

That's especially true for those who may have barely qualified for their existing mortgage -- especially first-timers with little credit or others with spotty credit.

Rates inching higher could further squeeze them.

Freddie Mac expects 30-year fixed-rate mortgage rates to average between 6.3 and 6.5 percent over 2007.

Even though rates are lower than they were a year ago, refinanced mortgages are costing more, ever for prime borrowers and that's likely due to stiffer qualifying requirements.

In the first quarter of 2007, the median ratio of new-to-old interest rate was 1.02. In other words, one-half of those borrowers who paid off their original loan and took out a new one increased their mortgage coupon rate by 2 percent or more, or roughly three-eighths of a percentage point at today’s level of fixed mortgage rates.

It was a different story in the first quarter 2006, when homeowners traded in loans for cheaper rates. In the first quarter of 2006, the median ratio of old-to-new interest rate was 0.98. In other words, one-half of those borrowers who paid off their original loan and took out a new one had an interest rate on their old loan that was at least two percent lower than the new interest rate, Freddie Mac said.

Luckily, many homeowners have moved quickly to circumvent the tighter money market.

"Most borrowers with prime adjustable-rate mortgages (ARMs) that were scheduled for an interest-rate adjustment sometime in 2007 have already refinanced these loans. Freddie Mac estimates that in September 2006, there were about $170 billion in prime ARMs outstanding with scheduled rate resets in 2007. As of March 2007, just over $30 billion of these loans remained active," said Amy Crews Cutts, Freddie Mac deputy chief economist, in a prepared statement.

Published: May 10, 2007

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.