In the second quarter of 2000, more than four out of five borrowers increased their mortgage debt load by 5 percent or more when they refinanced, according to numbers complied by Freddie Mac. On an annual basis, the percentage of people increasing their balances by that much hasn't been this high since 1990. A separate Federal Reserve Board study of the 1998 and 1999 refinance boom showed that more than one-third of borrowers took cash out of their homes when they got new loans. That compares to the 25 percent found in a Fed survey conducted after the last refinance surge in the early-1990s. People tapped substantial amounts of equity too, according to this July's study.
Mortgages remain tax advantaged relative to other types of borrowing.
That is, you can deduct the interest on your mortgage from your tax returns. You can't do that with your auto loans or things like that. A second reason is that borrowing with a home mortgage is less expensive than borrowing with an auto loan or credit card loan or something else that isn't secured. That's provided kind of the additional equity cushion that a family now has that they could borrow a little further against. Yet all of this mortgaging could cause problems over the next several months, especially if the tentative economic slowdown that seems to be in the works gets worse.