The “refi boom” is indeed coming to an end. For the first time since the beginning of the pandemic, purchase mortgages outpaced refinancings in the third quarter of 2021, according to the latest TransUnion report published on Wednesday.
The total mortgage balances grew 8% year-over-year to $10.5 trillion in the third quarter. New home purchases accounted for 53% of the total – higher than 43% of the same period of 2020, but still lower than 72% of 2019.
Meanwhile, refis dropped to 47% of the total mortgage originations driven by slowed demand, especially for “rate and term refinancing,” which decreased 23% year-over-year, the authors of the report found.
Joel Mellman, senior vice-president and mortgage business leader at TransUnion, said the expectation is that home purchases continue to outpace refis, as demand for homes stays strong and inventory gradually improves.
“This is assuming mortgage rates continue to rise, which will cause refinances to decline,” he said in a statement.
Following several quarters of hyper-growth, activity in mortgage origination has started to slow down due to a combination of low inventory and rising home prices, the report showed.
Originations went from 1.9 million in the third quarter of 2019 to 3.3 million in the same period of 2020 and 3.5 million in 2021.
The report shows that Fannie Mae‘s originations declined 7.1% in the third quarter of 2021, compared to 2020, while Freddie Mac increased only 1.1% year-over-year.
Jumbo loans had the best performance, up 36.9% in the same period. FHA loans increased at a slower pace: 15.8%.
According to Mellman, origination growth was most pronounced for Gen Z consumers. “We expect this to continue as that generation ages, and they look to enter the housing market and become home buyers for the first time.”
Another report published this week from SimpleNexus showed that loan officer commissions declined 17% year-over-year in the third quarter, largely because of waning refi volume.
“The heyday of ultra-low rates and enormous refinance volume is over, and compensation is starting to settle back to pre-pandemic levels,” said Lori Brewer, EVP and general manager at SimpleNexus.
