According to industry reports refinance loan applications are record high and the increase is considerable. This should not be taken as signs that homeowners are going to come out to spend. They are in for the savings. Refinance at these low rates will allow many homeowners to reduce their monthly mortgage payments. As a result they will have more money to sort their household spending and may be able to replenish eroded savings.
Again industry reports suggest that homeowners are looking to lower their debt. They either consolidate their expensive loans in to one low mortgage payment or lower their mortgage by transferring their bank savings in to refinance deal. Either way, they will be able to save money and lock in the low interest rates. From then onwards, budgeting and taking control of their finances will be much easier with fixed monthly loan payments. It is a good sign to see that this is the main reason people are refinancing. The days of cash out refinance for expensive holidays or new cars have long gone.
People may still consider buying that dream second home by raising money from their home equity. Low house prices may allow them to realise that dream. It could turn out to be a cleaver and timely investment. There may be other investment or business start up opportunities. Refinancing may allow homeowners to live the dream of working for themselves. Hard economical environment brings out better opportunities for people who can afford it.
This is a good time for Americans to lower their debt and outgoings. It is very unlikely that wages will pick up soon. Reducing bills will have the same effect as increased income. Therefore, they should not stop at refinancing. They should look for further savings in every aspects of their life. It does not mean they will stop spending. They will spend wisely; now that they have realized what effect money has in their life. Economic recovery starts at home and spreads over to rest of economy.