Threshold for refinancing

Threshold for refinancing

The point when the weighted-average coupon of an MBS is at a level to induce homeowners to prepay the mortgage in order to refinance to a lower-rate mortgage, generally reached when the weighted-average coupon of the MBS is 2 percentage points or more above currently available mortgage rates.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Threshold for Refinancing

The interest rate on a mortgage or a mortgage-backed security that is high enough to encourage property owners to refinance their mortgages at lower rates. If enough property owners refinance, this may affect the yield on a mortgage-backed security, depending upon its particular type. Generally speaking, the threshold for refinancing is two percentage points above prevailing interest rates.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved