What are the economic implications of a massive wave of refinancing by homeowners to lower rates?

Question by Nathan: What are the economic implications of a massive wave of refinancing by homeowners to lower rates?
If interest rates were to drop significantly more, say 30 YR fixed to sub 3%, and a huge percentage of homeowner mortgages are refinanced, what implications does this have on the broader economy, e.g. money supply, inflation, etc?

Best answer:

Answer by SDD
It would mean less interest being paid each month, which would mean households would have more money to spend on other things.

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