Mortgage lending on track for best year since 2013

First mortgages, home equity loans all up in first quarter

While a recent report from Fitch Ratings suggested that 2016 could be a rough year for mortgage servicers due to persistently low interest rates, those same interest rates could lead to a banner year for mortgage lenders.

The Fitch report suggested that the current low interest rate environment will drive some homeowners to refinance, a trend already being seen as refinance mortgage applications are on the rise.

But another recent report from Equifax showed that it’s not just refinance applications that are trending up; actual first mortgage originations were up sharply in the first quarter – to a point that 2016 could be the best year for mortgage lending since 2013.

According to Equifax’s report, the total dollar amount of first-mortgage originations during the first quarter of the year was $450.5 billion, which represented a year-over-year increase of 12.3%.

That figure was also the highest amount for a first quarter total since 2013.

Additionally, Equifax’s National Consumer Credit Trends Report showed that there were a total of 1.86 million new first mortgages in the first quarter, an increase of 10.3% over the same time period last year.

And with interest rates projected to stay low and mortgage applications on the rise, the rest of the year looks like it could be just as promising for mortgage lending.

In fact, analysis of the most recent report on mortgage rates from Freddie Mac suggested that mortgage rates will stay near historic lows for at least the rest of of the summer.

“This week, the 30-year fixed rate barely budged, rising just one basis point to 3.42%,” Freddie Mac Chief Economist Sean Becketti said of mortgage rates this week. “This pattern suggests that mortgage rates are likely to remain low throughout the summer.”

According to Equifax’s report, first-mortgage originations weren’t the only type of mortgages that rose in the first quarter. Home equity loans were up as well.

Per Equifax’s data, in terms of number of mortgages originated, there was a 23.5% year-over-year increase in home equity installments and a 10.2% increase in home equity lines of credit during the same time period.

Additionally, Equifax’s report showed that for HELOCs the total credit limits of new loans originated in the first quarter of 2016 was $35.2 billion, which represents a year-over-year increase of 14% and an eight-year high.

For HELOCs, the first quarter’s total originations and credit limits were both an eight-year high.

“The first quarter of 2016 was a strong one for mortgage lending and underwriting practices appear to have maintained their rigor over the last three years.” said Amy Crews Cutts, chief economist for Equifax.

Cutts also said that Equifax anticipates that the second quarter of 2016 will maintain this trend.

“And later this year, the much-anticipated addition of trended credit data to the mortgage underwriting process will help to strengthen the marketplace further by helping to statistically separate lower-risk borrowers from those presenting higher risk,” Cutts added.

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