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Percentage of Americans Planning to Refinance Their Mortgages Plummets
ISLANDIA, N.Y -- Only 8% of Americans plan to refinance their mortgage in the next year, down 50% from the 16% who anticipated refinancing in October 2002, according to the Cambridge Consumer Credit Index. Of those surveyed, 35% have refinanced in the past two years, up from 24% who had done so in 2002. 57% of Americans have not refinanced and have no intentions to do so, down slightly from 60% in 2002.The survey also asked respondents what they planned on doing with the money saved from refinancing. The largest percentage, 30%, (up from 23% in October 2002) planned to use the money to pay off non-credit card debt such as car and student loans. Some 23% (down from 31%) of the respondents planned to increase their savings. 22% (up from 20%) planned to spend the money on home improvements, cars or other major purchases. 10% (down from 15%) expected to use the proceeds to pay off credit card debt. 15% (up from 11%) planned to use the money in other ways."The results of the Cambridge Consumer Credit Index wildcard question show clearly that the refinancing boom which gave consumers billions of dollars in additional spending power is rapidly waning," says Jordan Goodman, spokesperson/financial analyst for the Cambridge Consumer Credit Index. "Compared to a year and a half ago, fewer Americans are putting the proceeds from refinancing into bank savings accounts and more of them plan to pay off credit card debt and other loans. With fewer refinancings anticipated in coming months, fewer consumers will be able to pay off their credit card and other debts or add to savings."The overall Index rose by 9 points in May to 68. The Index rose in all three of its component questions. The "Reality Gap," which is the difference between the amount of debt consumers say they will pay off in the next month versus the amount of debt they actually paid off a month later, increased by 8 percentage points from April to 16 points. A month ago, 82% of Americans planned to pay off debt, while a month later only 66% actually did so.In conjunction with the Index, the Cambridge Credit Counseling Corp. released its monthly survey of people who have called in for credit counseling services. Cambridge representatives ask callers for the primary reason that they found it necessary to get help with their debts now. Of the people who answered, this was the order of their responses:I am frustrated with high bank rates and fees (31.4%)My income has been reduced from a lower salary, less overtime or layoff (21.4%)I want to improve my ability to achieve future financial goals like buying a house or saving for retirement (15.6%)I got into too much debt by overspending (10%)Large medical expenses forced me to take on huge debts (7.7%)My lack of financial education caused me to take on too much debt (7.3%)Other (4.9%)Recently divorced or widowed (1.7%)In May, 42% of Americans plan to take on more debt to make such purchases, with 15% taking on a lot of debt and 27% taking on a little more debt. In contrast, 58% of Americans plan to pay off debt in the next six months, with 41% expecting to pay off a little and 17% expecting to pay off a lot. In April, 41% of Americans planned to take on more debt, while 59% planned to pay off debt."The next six-month level of 84 hit an all-time high for the third straight month, showing that consumers plan to make many major purchases with credit over the next few months," notes Goodman. "On one hand, this surge in the Index shows growing consumer confidence in the ability to repay debt. However, most of the increase in new debt is being taken on by lower-income Americans, who usually borrow because they need to pay their existing bills, not because they are spending on major new purchases."Visit the Cambridge Consumer Credit Index: www.cambridgeconsumerindex.comĀ "