Posted in Finance, Accounting and Economics Terms, Total Reads: 410
Definition: Refinance Wave
This kind of wave refers to the situation where a large drop in interest rates occurs and huge number of borrowers ask for refinancing their mortgage. The fall in long term interest rates causes the borrowers to refinance their loans to pay for lower interest rates. Same type of situation occurs when there is a right in short term interest rates. Borrowers in such a situation refinance their long term interest rates for take benefit of lower rates.
Refinancing doesn’t mean that the interest paid will be lower. In several cases, costs of refinancing are included in the loan repayment amount and refinancing may result in higher payments over the long horizon. Refinance Index use approximately 10% from 1348 to 1502 as fall in rates was enough to allow refinancing. The increase in refinancing applications was 58.9%. Main reason for increased participation was due to price appreciation of homes and easier lending agreements encouraging refinancing