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After the refinancing boom: will consumers scale back their spending?

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  • Alex Al-Haschimi
  • Margaret M. McConnell
  • Richard Peach

Abstract

Concerns are rising that the recent surge in home equity withdrawal has left consumers in a weakened financial position that will, over time, prompt a retrenchment in spending. However, a look at household assets and liabilities suggests that consumers have used the withdrawn funds to restructure their balance sheets and reduce their debt service burden. As a result, households may be in a better position to spend in the years ahead.

Suggested Citation

  • Alex Al-Haschimi & Margaret M. McConnell & Richard Peach, 2003. "After the refinancing boom: will consumers scale back their spending?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Dec).
  • Handle: RePEc:fip:fednci:y:2003:i:dec:n:v.9no.12
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    References listed on IDEAS

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    1. Bennett, Paul & Peach, Richard & Peristiani, Stavros, 2001. "Structural Change in the Mortgage Market and the Propensity to Refinance," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(4), pages 955-975, November.
    2. Glenn B. Canner & Karen E. Dynan & Wayne Passmore, 2002. "Mortgage refinancing in 2001 and early 2002," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), vol. 88(Dec), pages 469-481, December.
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    Cited by:

    1. Illing, Gerhard & Klüh, Ulrich, 2004. "Vermögenspreise und Konsum," Discussion Papers in Economics 316, University of Munich, Department of Economics.
    2. Guy Debelle, 2004. "Household debt and the macroeconomy," BIS Quarterly Review, Bank for International Settlements, March.
    3. Gerhard Illing, 2004. "Geldpolitik in den USA - die Fed in der Zinsfalle?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 57(06), pages 31-37, March.
    4. Andrew Kish, 2006. "Perspectives on recent trends in consumer debt," Consumer Finance Institute discussion papers 06-05, Federal Reserve Bank of Philadelphia.
    5. John Krainer & Elizabeth Laderman, 2011. "Prepayment and delinquency in the mortgage crisis period," Working Paper Series 2011-25, Federal Reserve Bank of San Francisco.
    6. Guy Debelle, 2004. "Macroeconomic implications of rising household debt," BIS Working Papers 153, Bank for International Settlements.
    7. Vladimir Klyuev & Paul Mills, 2007. "Is Housing Wealth an “ATM”? The Relationship Between Household Wealth, Home Equity Withdrawal, and Saving Rates," IMF Staff Papers, Palgrave Macmillan, vol. 54(3), pages 539-561, July.
    8. Benoit Mojon, 2007. "Monetary policy, output composition and the Great Moderation," Working Paper Series WP-07-07, Federal Reserve Bank of Chicago.
    9. Yamashita, Takashi, 2007. "House price appreciation, liquidity constraints, and second mortgages," Journal of Urban Economics, Elsevier, vol. 62(3), pages 424-440, November.

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