MortgageMortgage RatesOrigination

The purchase mortgage market is back on top

For the first time since December 2019, refis make up less than half of originations

The share of refinances in mortgage origination volume dipped below 50% for the first time in 15 months in March, according to Black Knight‘s new monthly data report, the Originations Market Monitor. With interest rates continuing to tick up, the purchase mortgage market is where most lenders will focus operations over the next year.

Since December 2019, millions of homeowners have been able to save hundreds of dollars a month in mortgage payments by refinancing to record-low mortgage rates, often in the 2% range. Thanks to the Fed’s intervention to lower the cost of borrowing, many homeowners shaved 125 basis points or more on their mortgages over the past year. That was a boon for mortgage lenders, the vast majority of which rode the refi wave to historic origination volume and record profits in 2020.

But the strengthening U.S. economy and acceleration of COVID-19 vaccines has pushed interest rates back up dramatically over the last quarter. By mid-January, mortgage rates began to rebound from historic lows, and by the end of March, Black Knight estimated the average 30-year mortgage rate sat near 3.34%. That was up 60 basis points from February, though still down 20 basis points from the same time last year.

In March, the share of refinancings fell to 48%, forcing many lenders to quickly pivot away from refis and toward the purchase market.

“Recent – and sharp – upward movements in interest rates have shifted the mortgage originations landscape very quickly,” said Scott Happ, Black Knight’s president of secondary marketing technologies. “The wave of refinance activity of the last year and some months has suddenly given way to a purchase-heavy mix. The implications of this shift touch nearly every area of mortgage lending, which in turn has implications for the wider economy.”


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Despite refi activity in freefall, overall rate lock volume was up 2.5% in March, with purchase locks jumping 32% from February. Cash-out refinance locks also rose 4% month-over-month.

The three metropolitan areas with the greatest percentage of lock volume was the Los Angeles-Long Beach-Anaheim metro, New York-Newark-New Jersey metro and the Washington-Arlington-Alexandria metro. In the NY-NJ-PA metro in particular, rate lock data was up 11.7% month-over-month, and refis still took more than half of the origination volume.

But the top 20 metros were neck-and-neck for whether purchases or refis made up more of the lending pie.

“This marks the first time – but almost certainly not the last – that purchase loans have made up a majority share of monthly mortgage lending since December 2019,” said Happ. “We also saw credit scores pull back, a trend that’s likely to continue among refis as high-credit borrowers, who have been largely driving record volumes, exit the market.”

If these homeowners do slowly exit the market, credit availability will continue to open up for borrowers with lower credit scores and options for higher LTV products. Zillow‘s senior economist Jeff Tucker estimates this next wave of buyers will be millennials.

“More affordable, medium-sized metro areas across the Sun Belt saw significantly more people coming than going – especially from more expensive, larger cities farther north and on the coasts,” said Tucker. “The pandemic has catalyzed purchases by millennial first-time buyers, many of whom can now work from anywhere.” 

On average, Black Knight estimated a typical credit score for a conforming loan was around 751 in March, six points lower than a year ago. On the other hand, credit scores averaged close to 666 for FHA loans, around four points higher year-over-year. According to the report, Black Knight said it’s seen year-to-date increases in the share of FHA and non-conforming originations, while conforming volumes – though still representing the lion’s share of March lending – are down.

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