Refinance loans continue to drive mortgage lending during first quarter

Refinances continued to drive mortgage lending across the United States during the first quarter, with total lending up 3% quarterly and refi activity up 12% during the year’s first three months.

That’s according to Attom Data Solutions, which found that lenders originated 3.77 million mortgages secured by residential properties (one to four units) from January through March. That’s the highest level of lending in more than 14 years, up 71% from the same period in 2020.

The quarterly bump marked the first time since 2009 that the total number of home mortgages increased from a fourth quarter to a first quarter.

Lenders originated $1.16 trillion worth of mortgages in the first quarter, up 5% from the fourth quarter of 2020 and 81% from a year ago. The first quarter’s total dollar amount was the largest quarterly figure since at least 2000.

Notably, the refi boom continued well into the first quarter of 2021, with the quarterly increase in refi activity outpacing the drops in both purchase lending and home equity lines of credit (HELOCs). Lenders issued 2,549,126 home refinance mortgages during Q1 2021, the most since the third quarter of 2003. Refinance lending, according to Attom’s data, has now more than doubled over the past year, rocketing 113% since the first quarter of 2020.

“Homeowners lined up to refinance their loans in ever-growing numbers during the first quarter of 2021, making for a highly unusual quarterly increase in total lending activity for that time of year,” said Todd Teta, chief product officer at Attom. “The home-mortgage industry almost always slows down in winter, but not this year because of so many homeowners hopping on super-low interest rates to reduce their monthly payments.”

The dollar volume of refinance packages grew to $777.5 billion in the first quarter, up 13.6% from the fourth quarter of 2020 and 114.1% from the first quarter of 2020.

“Eventually, the refi side of the lending business will ease up after enough homeowners get in on the good deals,” Teta added. “But there’s no sign of that happening in the very near future – yet another indicator of how the housing market remains strong amid uncertain economic times connected to the pandemic.”

In comparison, lenders originated 1,036,934 purchase mortgages in the first quarter, down 7.2% from the fourth quarter. The dip, however, isn’t indicative of weakness in the purchase sector; the quarterly decrease was the second-smallest in any Q4-to-Q1 period over the past 16 years. Annually, purchase origination was up 41.7% .

HELOC lending, on the other hand, was down 27.0% quarterly and 34.2% annually, with 187,029 HELOCs originated during Q1. The dollar volume of HELOC loans fell to $37.76 billion, down 33.7% from the last three months of last year to mark the largest quarterly drop since at least 2000.


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