As mortgage rates plummeted in the early days of the 2020 and 2021 coronavirus pandemic, millions of homeowners seized the opportunity to refinance. According to Freddie Mac data, the 30-year mortgage fell to 2.65% in early January 2021.

The Federal Reserve Bank of New York estimates that 14 million mortgages were refinanced during the "pandemic refinancing boom".

In a blog post published on Monday, the New York Fed said the surge in refinancing was partly due to strong household balance sheets and increased demand for housing.

Homeowners who refinanced paid an average of $220 less per month, the Fed said.

The largest share of refinanced mortgages came from mortgages made after 2015, the New York Fed said. Older mortgages, such as pre-2010 mortgages, were the least likely to be refinanced.

The New York Fed concluded that the homeowners most likely to refinance their mortgages had mortgage balances of $400,000 to $500,000.

"The mortgage refinancing boom is over, but its effects will be felt for decades to come," said Andrew Haughwout, director of family and public policy studies at the New York Fed, in a statement.

One of the biggest consequences of the refinancing boom is that today's potential homebuyers are now struggling to find a home to sell.

"The end of a recent period of ultra-low interest rates has discouraged homeowners to some extent from selling or replacing their properties," the New York Fed authors note.

In other words, homeowners are not keen on giving up their ultra-low mortgage rates and selling their homes. Today, not only are interest rates far higher, with 30-year rates exceeding 6%, but house prices continue to remain high.

According to Realtor.com, new listings - where many sellers put their homes up for sale - were down 16 per cent at the beginning of May compared to a year ago.

(Realtor.com is operated by News Corp.'s subsidiary Move Inc. and MarketWatch is a division of Dow Jones, which is also a subsidiary of News Corp.)

"Homeowners looking to move now will face increased borrowing costs and higher prices, with current home prices more than 36 percent higher than they were before the pandemic," the New York Fed said.

Homeowners seem reluctant to sell. According to the National Association of Realtors, sales of previously owned homes fell 22 per cent year-on-year in March. new figures for April home sales will be released this week.

Many buyers are turning to new construction to find good housing options. new home sales jumped 9.6 per cent in March. The National Association of Home Builders said in April that a third of the housing stock was new construction, a departure from the historical norm of new homes making up only 10 per cent of the overall housing stock.

And for the mortgage industry, business is likely to be much slower than during the pandemic as fewer homeowners refinance. The New York Fed said mortgage originations - which include refinanced mortgages - fell sharply to $324 billion in the first quarter of 2023, the lowest level since 2014

It's easy to see why there is little interest in refinancing: according to Freddie Mac, the average 30-year rate was 6.35% in mid-May, compared to 5.3% a year earlier.

The rise in rates between December 2020 and October 2022 is not only steep, it is historic: the New York Fed, citing Freddie Mac data, said rates rose from 2.68% in 2020 to 6.9% in 2022, the biggest swing since the early 1980s.