The federal reserve has been raising interest rates for more than a year and that means that it is getting more expensive for homeowners to raise money by borrowing against their equity. For example, the prime rate is now at 6.5%, while it was only at 4% at the beginning of 2004. However, with the substantial increase in the value of nearly all homes during the past few years, home owners are still finding it convenient to refinance their mortgages and withdraw cash.

The Seattle Times had an article today about how this “cash-out” refinancing will have the largest influence on first-time home buyers, who used home-equity lines for “piggyback loans”: “Unable to foot a 10 percent or 20 percent down payment, many bought homes with little or no money down by taking a first-lien mortgage and one or two home-equity lines, according to Mary Boudreau, owner of Penfield Financial, a Fairfield, Conn., mortgage broker.”