Fairly generous assumptions about the propensity of households to devote equity cash-outs to new spending suggest that refinancings may have boosted annualized real consumption growth between ¼ and ½ percentage point in the second half of 2002, the period of maximum impact.
A fairly substantial gap still remains between the current level of mortgage interest rates and the average level of interest on the outstanding stock of mortgages, suggesting that refinancings should continue at a brisk pace in the early part of this year. As refinancings slow later this year, however, they will create a slight drag on consumption growth relative to 2002.