Borrowers who refinanced in the first quarter of 2010 reaped the benefits of low interest rates. In fact, one-half of

borrowers who refinanced their conventional loans during the first three months of this year lowered their mortgage interest rate by at least 16 percent, according to Freddie Mac’s quarterly refinance report.

“The median interest-rate savings for borrowers who refinanced their conventional loan in the first quarter was 0.9 percentage points,” said Frank Nothaft, Freddie Mac VP and chief economist. “Refinances were about three-fourths of originations during the first quarter. In total, the lower rate translates into about $2 billion in interest savings for these borrowers over the first 12 months of the new loan.”

In addition to lowering their interest rate, 72 percent of borrowers who refinanced in the first quarter kept their loan balance largely unchanged or reduced their loan balance outstanding as a result of the refinance. “Cash-in” borrowers, those who reduced their loan balance, represented 18 percent of all borrowers who refinanced during the quarter.

“Cash-out” borrowers, those that increased their loan balance by at least 5 percent, represented 28 percent of all refinance loans. However, Freddie Mac noted that the cash-out shares recorded over the last two quarters were the lowest since the analysis began in 1985.

During the first quarter, approximately $9 billion in home equity was cashed out by homeowners when they refinanced their conventional prime-credit home mortgage, the smallest quarterly inflation-adjusted amount in ten years. Freddie Mac said main causes of the decline in cash-out refinance were reduced home prices and tighter underwriting standards for loan-to-value ratios.

Among the refinanced loans in Freddie Mac’s analysis, the median appreciation of the collateral property was a negative 4 percent over the median prior loan life of 4 years.