While the Fed's magical money transmission mechanism in mortgages (and thus housing 'wealth') broke in the middle of last year, this last week's move is a perfect summary of the sensitivity of whatever is left of the recovery. Mortgage rates rose a mere 5bps but this triggered a 7% plunge in refinancing activity. It appears clear from the chart below that, like most other 'markets' the Fed has intervened in, mortgages are broken - rising rates (from any Fed signaling of confidence in the economy or otherwise) will slump refi activity at the margin no matter how rosy the future; and lowering rates is now having no impact at all on the marginal homeowner's ability to refi. That's another fine mess you've got us into Bernanke/Yellen.
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Charts: Bloomberg
