Mortgage Refinance Activity Drops

As interest rates have climbed since last May, mortgage applications have dropped steadily and the damage is concentrated in refinancing activity.   The volume of mortgages for refinancing homes is down 64% from May 17^th to September 6^th while the volume for purchase is down 11% over the same period.   Over the last year (since September 7, 2012) refinancing is down 68% and purchase down 4.9%. The share of mortgages for refinance was 57% as of September 6^th 2013 compared to 79% a year earlier.  The chart shows the pattern of declining refinance activity.

For housing activity, there is a silver lining to the news since purchase activity has not dropped too badly in the face of rising interest rates.  There are difficulties for the general economy however.  Mortgage refinancing effectively raises people’s disposable income by lowering their monthly expenses.  The refinancing boom of recent years was widespread as home owners took advantage of low interest rates. That boost to consumer spending is fading fast.