New Research Paper Inequality During the COVID-19 Pandemic The Case of Savings from Mortgage Refinancing

New research working paper on refinancing during the COVID-19 pandemic

For several months now, I’ve been working on a new research paper with Sumit Agarwal, Souphala Chomsisengphet, Hua Kiefer, and Paolina Medina studying refinance activity this year.

When we started the project back in the spring we were not sure that the pandemic would allow households to refinance at rates similar to prior periods. It seemed possible that the pandemic would disrupt the mortgage market and make it difficult for households to take advantage of historically low rates. It turned out the mortgage market continued to function, and many borrowers did refinance.

However, the distribution of savings from refinance are highly skewed. In our paper we take a close look at refinance activity in 2020. Our research shows that while many borrowers did refinance in 2020, the rate of refinancing was skewed toward higher income borrowers, even after controlling for potential savings and factors like loan balance and credit score. And the increase in refinancing inequality has increased dramatically in 2020 compared to other recent waves of refinancing activity. In 2020, the pandemic has had a major impact, and we show this refinancing inequality is highly sensitive to the severity of the pandemic and associated recession as measured by COVID case rates, workplace mobility, unemployment claims, forbearance.

We’ve finally reached the point where we have a working paper to share. Check it out.

Here’s the latest (11-25-2020) draft (pdf) download.

You can view the paper on SSRN.


We study the distribution of savings from mortgage refinancing across income groups during the COVID-19 pandemic. Between February and June 2020, the difference in savings from refinancing between high- and low-income borrowers was 10 times higher than before. This was the result of two factors: individuals in the top quintile of the income distribution increased their refinancing activity more than comparable borrowers in the bottom quintile and, conditional on refinancing, they also captured the largest improvements in interest rates. Exploiting county-by-month variation in COVID-19 case rates we tie these results to the pandemic and explain up to 74% of increases in refinancing inequality through local economic conditions. We estimate a difference of $5 billion in savings from refinancing between the top quintile of the income distribution and the rest of the market. Our results have implications for the transmission of monetary policy and for the evolution of wealth inequality.