Mortgage refinance applications are dropping due to risinginterest rates, which may have a direct impact on fee income atsome credit unions, according to NCUA Chief Economist John Worth'slatest monthly economic update, released Wednesday.

“The sharp rise in mortgage rates has had a profound effect onrefinancing activity,” Worth said in the video, posted on theNCUA's YouTube account.

“The sharp decline in mortgage refinancing will take a toll onrefinancing activity at credit unions,” he said. “This may rein inloan growth and fee income at credit unions with a heavy refifocus.”

Worth said refinancing volume has dropped by more than 60% sincemortgage rates began rising in early May. The trend could alsoweaken real-estate loan growth for the rest of the year, headded.

Additionally, the increase in interest rates during the secondquarter reduced the market value of long-term, fixed-rate assets on credit unions' balance sheets, the NCUA said in arelease.

“This was reflected in total credit union unrealized gainsdropping more than $3 billion in the second quarter. Unrealizedgains of approximately $2.5 billion in the first quarter of 2013turned into unrealized losses of more than $1 billion in the secondquarter of 2013,” the NCUA said.

Worth also pointed out that consumer spending has increased,particular for new automobiles, due to a moderate improvement in the labormarket.

For a 12-month period ending June 30, 2013, new auto sales atcredit unions were up 10.7%. That's about twice as fast as othercredit union loan categories, said the NCUA release.