Homeowners Have Used Their Houses As Piggy Banks

Off the Charts: The Visual Says it All

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With mortgage rates as low as they had been in decades and home equity soaring, it was the perfect time for homeowners who needed cash to get it by refinancing their homes. And they did, in droves.

Homeowners cashed out $49.6 billion in equity from their homes in the first quarter of 2021, more than at any time since 2007, according to data from Freddie Mac. A chart of total home equity taken out by quarter shows the pandemic-era cash-out refinancing fad in full swing as homeowners feasted on delectable mortgage rates. (In a cash-out refinance, homeowners borrow more than they currently owe on their mortgage and take the difference in cash. Rising home prices have given homeowners plenty of equity to borrow against.)

But does this mean it’s 2007 all over again, as far as a brewing housing crisis is concerned? Fortunately, there are significant differences between now and the last cash-out craze, according to Millman, a consulting company that released a report on mortgage trends last month.

"Leading up to the global financial crisis, cash-out refinance mortgage loans were a significant driver of risk as many borrowers extracted equity from growing home prices," said Jonathan Glowacki, a principal at Milliman, in a statement. "While cash-out refinance volume has increased significantly in 2020 and 2021, we believe the risk is now somewhat mitigated by tighter underwriting standards."