The purchase mortgage market is back to the top


The share of refinancing in mortgage origination volume fell below 50% for the first time in 15 months in March, according to Black KnightOriginations Market Monitor’s new monthly data report. With interest rates continuing to rise, most lenders will be focusing their activities on the mortgage market over the next year or so.

Since December 2019, millions of homeowners have been able to save hundreds of dollars per month in mortgage payments by refinancing at record mortgage rates, often in the range of 2%. Thanks to the Fed’s intervention to lower the cost of borrowing, many homeowners have shaved 125 basis points or more on their mortgages in the past year. This has been a boon for mortgage lenders, the vast majority of whom have propelled the wave of refi to historic origins volume and record profits in 2020.

But the strengthening US economy and the acceleration of COVID-19 vaccines pushed interest rates up dramatically in the last quarter. In mid-January, mortgage rates started to rebound from historic lows, and by the end of March, Black Knight estimated the 30-year average mortgage rate to be close to 3.34%. This was up 60 basis points from February, but still down 20 basis points from the same period last year.

In March, the share of refinancing fell to 48%, forcing many lenders to quickly turn away from refis to the buying market.

“The recent – and sharp – upward movements in interest rates have changed the mortgage landscape very quickly,” said Scott Happ, president of secondary marketing technologies at Black Knight. “The wave of refinancing activity over the last year and a few months has suddenly given way to a heavy buying mix. The implications of this change affect almost all areas of mortgage lending, which in turn has implications for the economy as a whole. “

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Despite the plummeting refi activity, the overall rate lock volume rose 2.5% in March, as buy locks jumped 32% from February. Cash-out refinancing locks also increased 4% month over month.

The three metropolitan areas with the greatest percentage of lock volume were the Los Angeles-Long Beach-Anaheim subway, the New York-Newark-New Jersey subway, and the Washington-Arlington-Alexandria subway. In the NY-NJ-PA subway in particular, rate foreclosure data rose 11.7% month over month, and refis still took more than half the origins volume.

But the top 20 metros were neck and neck over whether buying or refitting was more of the loan pie.

“This is the first time – but certainly not the last – that purchase loans have made up a majority share of monthly mortgages since December 2019,” Happ said. “We have also seen credit scores decline, a trend that is expected to continue among refis as high-credit borrowers, who have largely generated record volumes, exit the market.”

If these homeowners slowly exit the market, credit availability will continue to open up to borrowers with lower credit scores and options for higher LTV products. ZillowSenior economist Jeff Tucker believes this next wave of buyers will be millennials.

“The mid-sized, more affordable metropolitan areas of the Sun Belt saw a lot more people coming than leaving, especially the more expensive and larger towns further north and on the coasts,” Tucker said. “The pandemic has catalyzed the purchases of millennial first-time buyers, many of whom can now work from anywhere.”

On average, Black Knight estimated that the typical credit score for a compliant loan was around 751 in March, six points lower than a year ago. In contrast, credit scores averaged around 666 for FHA loans, about four points higher year over year. According to the report, Black Knight said the share of FHAs and non-compliant origins has increased since the start of the year, while compliant volumes – though still representing the lion’s share of March loans – are down. .


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