Refinancing & The Economy

The ABCNews/Money magazine Consumer Comfort Index last week fell to -19 from -18 the prior week. It’s down eight points in the past three weeks and well below its 2004 peak of -3 in mid-Jan. Of those polled, 33% say the economy is in good shape and 54% say their own finances are healthy, both down a point in the week. (That means that 46% of Americas believe their finances are not healthy - yikes!)

So, is the consumer getting stronger or weaker? From this report, it seems like the consumer is starting to pull back. And, perhaps for good reason. As you can see from the chart below, mortgage refinancing has dropped significantly now that interest rates have moved higher. Many economists and Wall Street analysts believe that mortgage refinancing was one of, if not the most important factor that helped U.S. consumers in the past couple of years. If that is true, we may see a major change in consumer spending in the second half of the year.