Second quarter purchase lending hit its highest level in 10 years as the total number of purchase mortgages being originated still falls far below pre-crisis averages, according to the most recent Mortgage Monitor report released by Black Knight Financial Services on Monday based on data through July 2017.
According to Black Knight’s Executive VP of Data and Analytics Ben Graboske, more stringent credit requirements enacted in the wake of the Great Recession may be hampering purchase-lending volumes.
“We saw positive growth in lending in the second quarter, with $467 billion in first lien mortgages originated,” said Graboske.“While down 16 percent from a year ago, that marks a 20 percent increase in mortgage lending over Q1. Drilling down into the make-up of those originations, we see that refinance lending made up just 31 percent of all Q2 originations–the lowest such share in over 16 years.”
Graboske adds that refinance volumes were down, falling 20 percent from Q1. According to the data, this drop was offset by a 57 percent seasonal rise in purchase lending, with purchase originations totaling $321 billion in Q2 2017, the highest quarterly volume since 2007.
According to the report, as a result of growing average loan amounts for purchase originations, “the total dollar amount of purchase originations is higher than averages seen from 2000-2003, prior to both the peak in home prices and the Great Recession that followed.”
However, Graboske explained that the number of purchase loans being originated still lags the pre-crisis average by almost 30 percent.
“While overall purchase origination volumes are strong from a total dollar amount perspective, the market still does not appear to be performing at peak capacity,” he said. One key cause is that borrowers with credit scores of 720 or higher accounted for 74 percent of all Q2 2017 purchase loans as compared to a pre-crisis average of 47 percent.
Today, the lack of credit availability for borrowers is causing, “a strong headwind for the purchase market,” according to Graboske.
To view the full data report, click here.