When Fed Chairman Ben Bernanke left the door open to an early end of asset purchases, he set off a burst of activity in the markets. Stocks fell, interest rates rose and those in the mortgage business braced themselves.
(Read More: Fed Chairman Ben Bernanke's Statement)
Sure enough, overall mortgage application activity was down 8.8 percent in the week ended May 24; within that, refinancing activity fell an even more dramatic 12.3 percent.
Is the refi party over?
It's certainly winding down, according to the Mortgage Bankers Association, which reported the decline in mortgage applications.
(Read More: Mortgage Rates Surge Amid Fed Fears)
"We have been expecting that refinancing volume would drop pretty sharply in the second half of 2013," said Mike Fratantoni, the MBA's vice president of research and economics. "This refinancing boom has been going since late 2008, early 2009. The best credit borrowers have been able to refinance a couple of times. As rates tick above those levels, that group of borrowers is no longer going to have an incentive to refinance."
Fratantoni expects refinancing as a share of mortgage applications to drop sharply from current levels "to below 50 percent before the second half of the year," he said. "Right now our forecast is a 74 percent refinancing share in the first quarter, 67 percent in the second, 46 in the third, and 42 in the fourth."
In 2014, refinancing applications will account for about 36 percent of all mortgage applications—less than half their current share, he predicted.
Not everyone is that bearish on refinancings, however.
"I think the Fed will hold strong to make sure the economy is on solid footing," said Bob Walters, chief economist at Quicken Loans. "I think we're good through 2013, but going beyond that, it starts to get a little fuzzy. The market's starting to price some of that uncertainty in."
Walters sees rates "higher but not a lot higher" by the end of this year, with a 30-year fixed rate mortgage for an applicant with strong credit rising to between 4.25 and 4.75 percent from last week's 3.75 percent. And he expects refis to drop to half or slightly more than half of all mortgage applications by year-end.