One More Christmas Present (In May)

You may remember the three Christmas presents that the US economy gave us at the end of last year. They all meant more money in our pockets this year over last year. And that in turn has produced more retail spending in Q1 2009 than even Santa expected.

But there seems to be one more big monetary present now making its way into the US household budget. According to a recent report in the Wall Street Journal, half of the mortgage refinances in Q1 provided home owners the ability to lower their annual rate by at least 20%.

According to the Mortgage Bankers Association (MBA), $300B of new loans were originated in Q1. (Wells Fargo claimed one third of that business in their earnings call.)

So what is the bottom line for Main Street?

Freddie Mac Chief Economist Frank Nothaft says that if the Q1 refinancing pace keeps up for the rest of the year, US homeowners in aggregate will save about $10 billion in mortgage payments in just this first year after refinancing.

According to Nothaft that means on a $200,000 mortgage, borrowers are now saving on average $160 a month. That's close to $2000 for the year. And the MBA is currently forecasting double the amount refinancing business in this current quarter over Q1.

No wonder many US consumers are feeling festive again.