The Great Pandemic Mortgage Refinance Boom

Andrew Haughwout, Donghoon Lee, Daniel Mangrum, Joelle Scally and Wilbert van der Klaauw

No 20230515b, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Total debt balances grew by $148 billion in the first quarter of 2023, a modest increase after 2022’s record growth. Mortgages, the largest form of household debt, grew by only $121 billion, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. The increase was tempered by a sharp reduction in both purchase and refinance mortgage originations. The pandemic boom in purchase originations was driven by many factors – low mortgage rates, strong household balance sheets, and an increased demand for housing. Homeowners who refinanced in 2020 and 2021 benefitted from historically low interest rates and will be enjoying low financing costs for decades ­to come. These “rate refinance” borrowers have lowered their monthly mortgage payments, improving their cash flow, while other “cash-out” borrowers extracted equity from their real estate assets, making more cash available for consumption. Here, we explore the refi boom of 2020-21–who refinanced, who took out cash, and how much potential consumption support these transactions provided. In this analysis, as well as the Quarterly Report, we use our Consumer Credit Panel (CCP), which is based on anonymized credit reports from Equifax.

Keywords: mortgage; Consumer Credit Panel; refinance; pandemic (search for similar items in EconPapers)
JEL-codes: D14 G21 (search for similar items in EconPapers)
Date: 2023-05-15
New Economics Papers: this item is included in nep-ban, nep-inv and nep-ure
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