Mortgage lending slips in second quarter as refinancing slows down

Mortgage lending took a step back during 2021’s second quarter, with 3.78 million mortgages secured by residential properties originated from April through June, according to Attom Data Solutions.

Though that’s up 29% from the second quarter of 2020, it’s down 3% from the first quarter of 2021, marking the first time since early last year that the total number of home mortgages dropped quarter over quarter. Even more notably, it’s the first time the number of mortgages has decreased from a first quarter to a second quarter since 2011.

Mortgage rates dropping back below 3% helped increase purchase lending in the second quarter, with lenders issuing 1.32 million purchase mortgages during the period, up 52.4% annually and 22.4% quarterly. Refinance activity, however, decreased, with lenders originating 2.23 million refis from April to June — up 25.5% year over year but down 14.8% month over month.

The decline in refi lending was the first since the first quarter last year and the largest quarterly drop since the first quarter of 2018.

“The demand for home loans across the country shifted significantly in the second quarter as refinancing activity receded and home-purchase and equity loans increased,” said Todd Teta, chief product officer at Attom. “We haven’t seen that pattern for several years. The big increase in households looking to buy surely had a lot to do with that.”

By dollar amount, lenders issued $1.18 trillion worth of mortgages in 2021’s Q2, up 39% yearly but down 1% quarterly. The total amount of purchase mortgages, at $465.5 billion, is up 52.4% from Q2 2020 and 22.4% from Q1 2021. That growth, however, was offset by the decrease in refi mortgage originations, which, at $674.7 billion in the second quarter, was up 25.7% from one year prior but down 15.4% from the first quarter.

“We may be getting to the point where so many homeowners have refinanced that the need for those deals is tapping out,” Teta said. “We will see whether this is a momentary blip or a real trend over the next few months, which looks to be a really key period for the lending industry.”

With prices continuing to climb, downpayments and loan amount both hit new recent highs. The median downpayment in the second quarter was $25,000, up 35.1% from the quarter prior. The median loan amount was $286,440. Both figures are the highest seen since at least 2005.


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