A Major Source Of Free Money For Americans Is Starting To Disappear

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If you can refinance your mortgage at a much lower rate, it’s something of a free lunch (assuming all the fees don’t end up costing you more than they’re saving you).But rates on 30-year mortgages are rising.

According to the latest report from the Mortgage Bankers Association, refis have now fallen for 5 6 consecutive weeks.

From Reuters:

The decline in refinancing was driven by a 12.0 per cent drop in government refinance activity, while conventional applications fell just 3.4 per cent, the report said.

The refinance share of total mortgage activity slipped to its lowest level since July of last year at 71.9 per cent of applications from 73.4 per cent.

Fixed 30-year mortgage rates jumped to their highest level since November to average 4.23 per cent, up 4 basis points from 4.19 per cent.

This is not a minor issue.

The ability to refinance mortgages at lower and lower rates is a big part of what has allowed Americans to keep lowering debt service costs and keep spending. The Bonddad Blog had a great post about this last week.

If this continues, it’s not hard to imagine this playing into the Fed’s decision on whether to launch a further round of monetary easing with the idea of pushing down interest rates.

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