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When John and Goldie Oliver learned they could cut the life of their mortgage in half and pay just $25 extra a month, they jumped at the opportunity.

The Olivers, a Broken Arrow family with three children and another on the way, are refinancing their 30-year mortgage with 15-year debt, taking advantage of a two-month plunge in interest rates that has driven home loan rates to 17-month lows. Over the life of the loan, they’ll wind up saving about $116,860 because they refinanced.

“We wanted a shorter-term, lower-interest rate loan that we could pay down in the next six to seven years,” said John Oliver, a 39- year-old swimming pool contractor. “If we pull it all off, I’ll probably be able to retire at age 50.” Tens of thousands of U.S. homeowners are doing the same thing each week, taking out new mortgages and refinancing old ones. Homeowners are refinancing at triple the rate of this time last year. “Managing your debt is for many people one of the most important aspects of financial planning,” said Ray Ferrara, a certified financial planner at ProVise Management Group in Clearwater, Fla. “Given that rates are as low as they are, it would make a great deal of sense for people to refinance if they have significant debt.” Last week, homeowners were borrowing at average rates of 7.64 percent for 30-year mortgages, 7.25 percent for 15-years, and 5.90 percent for one-year adjustable-rate loans, according to preliminary figures from BanxQuote, which gathers information on consumer lending. While rates have gone up during the past few days, homeowners are still refinancing old mortgages at the fastest pace since February 1996, according to the Mortgage Bankers Association of America. “I can’t even leave my office right now,” said Greg Huber, president of Apollo Mortgage in Portland, Ore. “I’ve just been answering refinance questions since rates have come down.” The Olivers took out their home loan five years ago at a rate of about 11 percent. Since then, the value of their property rose and their credit standing improved. Once interest rates dropped, they were able to slash the rate on their $65,000 loan to 7c percent and shorten the life of the mortgage. The extra $25 they will spend each month is a small price for having the home paid off early, John said. Many homeowners decided to refinance after the 30-year mortgage rate dipped below 7.5 percent in early July. “Anytime you get lending rates below 7.5 percent, it really starts stoking the fire for refinancing,” said Steve Admire, president of Tulsa-based Advantage One Mortgage, which brokered the Oliver loan. The company fielded about twice as many customer calls on refinancing in July as in June, he said. “It’s on everybody’s mind now.” Refinancing may be a money-saving proposition for more than one- third, or about $1.2 trillion, of the nation’s outstanding loans, said Dale Westhoff, a mortgage prepayment analyst at Bear, Stearns. If rates drop one-third of a point more, about 40 percent of loans outstanding will be expensive compared with getting a new loan, he said. Debtors needn’t have such high-interest rate loans to make refinancing worthwhile. Reducing the rate on a mortgage by d of a point makes refinancing profitable as long as the homeowner isn’t also paying brokers’ fees or other charges, said Dean Caso, president of Newton, Massachusetts-based Homevest Mortgage. Homeowners paying such charges often must wait until rates drop 3/4 to a full point before refinancing makes sense. The smaller the loan size and the shorter the remaining life of the loan, the more rates must fall to make refinancing worthwhile. Analysts say refinancing is likely to increase in the next two months even if rates keep rising. That’s because many homeowners don’t want to miss out on relatively low rates. “If it makes sense to refinance right now and you’re saving money, don’t bottom-fish for lower rates,” Caso said. “Any time you bottom- fish, you’ll usually lose.” Besides saving money for borrowers, a pickup in refinancing could boost the overall economy as homeowners wind up with extra cash to spend.

America’s mortgage refinancing boom — which has put hundreds of billions of dollars in borrowers’ pockets and kept the economy afloat through terrorism fears, two wars, mass layoffs and confidence- shattering corporate scandals — is fading fast.

Refinancing applications plunged by a dizzying 60% since their peak only nine weeks ago. That remarkable collapse followed a sharp rise in bond market interest rates, which are used to help set home loan rates.

And some lenders, gaping at an abrupt end to what they call the most monumental refinancing wave in history, are resorting to unconventional tactics to keep the economy’s brightest sector from dimming too rapidly.

A storefront poster at the Universal Savings Bank in downtown Milwaukee lures potential clients with offers of a free laptop and a platinum Visa credit card if they qualify for a loan. Other incentives sound more like auto-dealer come-ons and less like the pin- striped world of banking: West Allis-based Guardian Credit Union offers a $500 cash rebate to borrowers.

The sharp drop in refinancing is certain to have implications for the broad economy, economists and banking experts concur.

“All I’ve been saying for the last three years is: ‘This is not real. Prepare yourself,’ ” said Stephen LaDue, president of Affiliated Mortgage & Financial Corp. in Wauwatosa. Washington policy- makers have relied on low interest rates to propel the housing market forward in what LaDue called “a single-sector stimulus.”

For every 1 percentage point increase in lending rates on standard 30-year fixed-rate mortgages, analysts at Wells Fargo & Co. expect a 50% drop in mortgage refinancing. Already, the 30-year benchmark mortgage rate has increased by more than that magnitude. It surged to an average of 6.34% in the week that ended Friday, according to Freddie Mac, the giant mortgage finance company. That’s up from 4.99% in mid-June, which was the lowest rate in nearly five decades.

“We didn’t think we’d be at this point until sometime next year,” said Douglas G. Duncan, chief economist in Washington at the Mortgage Bankers Association of America.

“Interest rates are just flat scaring people,” said Larry Hornik, a loan supervisor at Guardian Credit Union.

Since early 2000, millions of homeowners took advantage of gradually declining loan rates, often borrowing additional money to pay for remodeling, new cars, vacations and college tuitions. Many paid off old debts.

“Take the money and run,” was what LaDue at Affiliated Mortgage said he advised his colleagues and customers alike. He personally saved $41,000 in interest costs over seven years through his latest, and probably last, refinancing, he said.

New loans allowed borrowers to take advantage of sharp gains in the values of their homes, and some cut hundreds of dollars from their monthly payments.

Kept economy afloat

U.S. consumer debt expanded in July as Americans took out loans to buy more cars, Federal Reserve statistics showed.

Borrowing through credit cards, auto loans and other non-mortgage personal debt increased 4.1 percent, or $6 billion, to $1.77 trillion, the Fed said. In June, consumer credit rose by a revised $151.3 million, or 0.1 percent.

Consumer spending climbed in July even as the economy lost 49,000 jobs. Household purchases, which account for 70 percent of the economy, increased at the fastest pace in four months, led by a jump in sales of autos and other durable goods, the Commerce Department reported earlier.

“If the economy were just made up of consumer expenditures, we could say there has been a full recovery from recession,” said Chris Rupkey, an economist at the Bank of Tokyo-Mitsubishi in New York, before the report.

Economists expected a $5 billion rise in debt in July, based on the median of 43 forecasts in a Bloomberg News survey. Estimates ranged from a decrease of $1 billion to an increase of $8.2 billion. The Fed revised its initial estimate for June of a $400 million decline.

Revolving credit, which includes credit cards, rose 0.5 percent, or $327.1 million, in July to $726.9 billion, after falling $1.27 billion in June.

American Express Co., the fourth-largest U.S. credit card issuer, said July 28 that its quarterly profit rose 12 percent to a record as customers charged more on their cards and as loan losses declined.

Non-revolving loans for vehicles and mobile homes, which make up almost two-thirds of household non-mortgage debt, jumped 6.6 percent, or $5.7 billion in July, to $1.047 trillion, after rising $1.4 billion in June.

Auto dealers reported that sales of new cars and light trucks rose 5.5 percent in July to a 17.3 million-vehicle annual rate from June’s 16.4 million.

WITH general interest rates coming down, when can you expect rates on your own loans to drop?

Variable-rate loans will drop on a schedule written into your lending agreement (which you may not have read). Loans with fixed rates normally don’t change, but might in some cases. Here’s what to expect:

* On credit cards: Nearly half of all cards currently carry variable rates, said Robert McKinley, president of CardWeb.com, which keeps track of the industry. They’re often tied to the bank prime lending rate, which dropped again last week - the third decline this year.

The prime rate currently stands at 7.5 percent. Variable-rate cards are charging an average of 14.66 percent on unpaid balances, McKinley said.

The majority of banks adjust their card rates monthly, so many customers will already have seen a cut.

The remaining banks generally adjust quarterly, and April starts a new quarter. This month, virtually all consumers with variable-rate cards should be on track to lower rates. Watch for it in your next billing cycle.

So-called “fixed-rate” cards are another story. When you sign up, you probably assume that “fixed” carries its normal English meaning - that is, a rate that won’t change. Poor you. The meaning is far more slippery than that.

Credit card come-ons

As an example, take a recent offer from Fleet Bank for a card with a “revolutionary low, fixed rate” of just 7.99 percent. The mailing said that this wasn’t a mere “introductory rate” that would rise after “only a few short months,” but a real, fixed rate.

The reader who showed me this mailing signed up for the card. Six months later, her “fixed” rate rose by about 2.5 percentage points.

And yes, that’s legal. Fleet spokeswoman Deborah Pulver said it’s “well recognized” that credit-card terms can be “modified,” at the will of the bank.

Oh? Well recognized by whom?

You should probably expect any super-low “fixed” rate to be “modified” upward. The fine print in credit-card agreements gives the bank the right to change the rate at will, as long as you’re notified at least 15 days in advance.

For top credit risks, fixed rates today range from around 9.9 percent to 12.99 percent. The average fixed rate: 16.04 percent. If interest rates keep on going down, some fixed-rate cards might be forced to cut rates to keep people from switching to something better.

If your card issuer is offering lower rates to new customers, call and ask for that rate yourself That usually works for people in good credit standing. “Banks offer lots of rates,” McKinley said. “They’ll offer a lower rate to retain you.”

For most couples, having a first child is a financial shock. For Mark and Krista Schumacher, Justin’s birth packed a double whammy: They slashed their income by 25 percent when Krista quit her job to stay home.

But the Schumachers, who live in Pickerington, Ohio, had taken pains to cushion the blow. Throughout their five-year marriage, they banked Mark’s pay raises as a physician’s assistant, building up significant retirement savings and a healthy emergency fund. They don’t have credit card debt and are paying off their car loans.

“We believe in the pay-yourself-first philosophy, and my wife’s frugality is contagious,” says Mark, 32.

When Krista, 29, quit her job as an interior designer, the couple saved money on gas, clothing and dry cleaning. And with Krista staying home, they don’t have to worry about child care.

But that wasn’t enough to offset the loss of Krista’s salary. So the Schumachers trimmed costs by dropping landline long-distance service and shopping for a better deal on auto and homeowners insurance. Total savings: about $1,000 a year.

Mark and Krista have also turned into homebodies. “I play with Justin more than I play golf,” says Mark. They eat out less often and don’t pay for services they can do themselves, such as mowing the lawn and cleaning the house.

They also decided to refinance their home loan with a 30-year, fixed-rate mortgage, reducing their house payments by about $3,000 a year — enough to cover a boost in Mark’s disability and life insurance when Justin was born. Their son’s birth also prompted the couple to draw up wills and name a guardian for Justin.

Expanding their family from two to three translates into major tax savings. Not only does Justin qualify for his own personal exemption this year — the $3,200 deduction reduces the family’s tax bill by $800 — but the Schumachers also qualify for the child tax credit, which shaves another $1,000 off their federal taxes.

Now Mark and Krista can focus on starting a 529 state-sponsored college-savings plan for Justin’s education.

Keep these tips in mind if you’re preparing for a new baby: