Failure to Refinance
Households that fail to refinance their mortgage when interest rates decline can lose out on substantial savings. Based on a large random sample of outstanding U.S. mortgages in December of 2010, we estimate that approximately 20% of households for whom refinancing would be optimal and who appeared unconstrained to do so, had not taken advantage of the lower rates. We estimate the present-discounted cost to the median household who fails to refinance to be approximately $11,500, making this a particularly large consumer financial mistake. To shed light on possible mechanisms and corroborate our main findings, we also provide results from a mail campaign targeted at a sample of homeowners that could benefit from refinancing.
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Copy CitationBenjamin J. Keys, Devin G. Pope, and Jaren C. Pope, "Failure to Refinance," NBER Working Paper 20401 (2014), https://doi.org/10.3386/w20401.Download Citation
Non-Technical Summaries
- As of December 2010, approximately 20 percent of households with mortgages could have refinanced profitably but did not do so....
Published Versions
Keys, Benjamin J. & Pope, Devin G. & Pope, Jaren C., 2016. "Failure to refinance," Journal of Financial Economics, Elsevier, vol. 122(3), pages 482-499. citation courtesy of 
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