Big bank mortgage originations continued rising in Q3 thanks to low interest rates

Wells Fargo, JPMorgan Chase, Citigroup all saw originations increase

Continuing a trend that stretches back through most of this year, mortgage originations were up at some of the nation’s biggest banks in the third quarter due to this year’s consistently low mortgage rates.

As seen in the most recent data from Freddie Mac, mortgage interest rates have been sitting at approximately one full percentage lower throughout this year than they were last year.

The lower rates have led to an increase in overall originations, as the latest projections show that 2019 will likely best year for mortgage originations since 2016.

Evidence of that began to emerge earlier this year when mortgage originations rose at Wells FargoJPMorgan Chase, and Citigroup in the second quarter.

And that trend continued in the third quarter.

Each of those banks reported their third quarter earnings on Thursday, and examinations of each bank’s earnings materials show that originations were up at each bank due to low mortgage rates.

Wells Fargo, for example, originated $58 billion in mortgages in the third quarter. That’s up from the $53 billion originated in the second quarter, and from the $46 billion originated during last year’s third quarter.

In fact, the third quarter of 2019 saw Wells Fargo’s highest dollar amount in originations of any quarter in the last year.

Unsurprisingly given the interest rate environment, the increase in originations came as the share of refinances went up as well.

According to Wells Fargo, 40% of its mortgage originations in the third quarter were refinances, the highest that share has been in at least a year.

In the second quarter, for example, Wells Fargo saw 68% purchase originations, compared to 32% refinances, but in the third quarter, it was a 60/40 split between purchases and refinances.

The share of refinances has climbed steadily over the last year. During the third quarter of 2018, only 19% of Wells Fargo’s originations were refinances. That figured climbed to 22% in the fourth quarter of 2018, 30% in the first quarter of this year, 32% in the second quarter, and finally, to 40% in the third quarter.

As one might expect, that increase was mirrored by the mortgage applications Wells Fargo received. According to the bank, it received $85 billion in mortgage applications in the third quarter, which was actually down slightly from the second quarter when the bank got $90 billion in applications.

But, of those $85 billion in mortgage applications in the third quarter, a full 50% were for refinances. That’s nearly double what it was in the same time period last year.

Wells Fargo is also showing strong continuing demand for mortgages, as the bank reported that it has $44 billion in its application pipeline (applications that are in process).

That’s the same amount that it was in the second quarter, but up from $32 billion in the first quarter and $22 billion in the third quarter of last year.

Mortgage originations were also up at JPMorgan Chase.

According to the bank, it originated $32.4 billion in mortgages in the third quarter, up from $24.5 billion in the second quarter, $15 billion in the first quarter, $17.2 billion in the fourth quarter of 2018, and $22.5 billion in the third quarter of last year.

Citi has the smallest mortgage business of the three, but its originations are on the rise as well.

That continues a recent trend at the bank, which scaled back its lending operations a few years ago, but began to ramp those back up last year.

According to the bank, it originated $5 billion in mortgages in the third quarter, up 28% over the second quarter total of $3.9 billion and up 85% over the third quarter of last year, when the bank originated $2.7 billion in mortgages.

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