Mortgage refinance applications are dropping due to rising interest rates, which may have a direct impact on fee income at some credit unions, according to NCUA Chief Economist John Worth's latest monthly economic update, released Wednesday.

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

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

Worth said refinancing volume has dropped by more than 60% since mortgage rates began rising in early May. The trend could also weaken real-estate loan growth for the rest of the year, he added.

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

“This was reflected in total credit union unrealized gains dropping more than $3 billion in the second quarter. Unrealized gains of approximately $2.5 billion in the first quarter of 2013 turned into unrealized losses of more than $1 billion in the second quarter 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 labor market.

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