BY JANN SWANSON
Refinancing activity has probably held up better than expected as
interest rates have risen. Refinance applications accounted for
more than 40 percent of the total in each of the Mortgage Bankers
Association’s weekly application volume summaries in December,
aided by an unexpected dip in rates. But CoreLogic’s chief
economic Frank Nothaft is predicting a dim future for that part of the
business.

In his Economic Outlook for January, Nothaft says he expects mortgage rates to reach their highest
levels in a decade this year, affecting home buyers’ monthly payments and lessening the impact of
new conforming loan limits. But the larger effect will be on refinancing. Millions of homeowners have
already refinanced into the record low rates over the last few years, and they, as well as those who
have purchased during the same period, are unlikely to refinance unless they need to cash out some
of their home equity.
He used CoreLogic data to calculate the distribution of outstanding single-family mortgage debt by
interest rate and found only 3 percent of the total in mortgages with a rate of 6 percent or more, a
total outstanding debt of about $300 billion. He speculates that these homeowners have not
refinanced because of insufficient equity, credit problems, or small balances; the average loan
size was about $100,000.