Failure to Refinance

Benjamin Keys, Devin Pope and Jaren Pope

No 20401, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Households that fail to refinance their mortgage when interest rates decline can lose out on substantial savings. Based on a large random sample of outstanding U.S. mortgages in December of 2010, we estimate that approximately 20% of households for whom refinancing would be optimal and who appeared unconstrained to do so, had not taken advantage of the lower rates. We estimate the present-discounted cost to the median household who fails to refinance to be approximately $11,500, making this a particularly large consumer financial mistake. To shed light on possible mechanisms and corroborate our main findings, we also provide results from a mail campaign targeted at a sample of homeowners that could benefit from refinancing.

JEL-codes: D03 R30 (search for similar items in EconPapers)
Date: 2014-08
Note: LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published as Keys, Benjamin J. & Pope, Devin G. & Pope, Jaren C., 2016. "Failure to refinance," Journal of Financial Economics, Elsevier, vol. 122(3), pages 482-499.

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Journal Article: Failure to refinance (2016)
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