Last year saw the most purchase dominant market with 64 percent of the close to 4.8 million mortgages originated through the first three quarters of 2018 being made up of purchase loan transactions according to Black Knight's latest Mortgage Monitor report.
The report said that of the total originations tracked by Black Knight only 8.5 percent were rate or term refis—the lowest level originated since Black Knight began tracking the metric in 2005. Cash-outs made up 27 percent of all originations this year, inching up slightly from 2017 and the highest share for any year since 2008.
Despite this decrease in originations, as mortgage interest rates dropped from multi-year highs in recent weeks, the number of homeowners with mortgages who could likely qualify for and see at least a 0.75 percent interest rate reduction by refinancing increased by approximately 550,000. The report revealed that while this represented a 29 percent increase over a decade low, the total refinanceable population was still down almost 50 percent from last year.
"As refinances decline, the purchase share of the market rises correspondingly," said Ben Graboske, EVP of Black Knight's Data and Analytics Division. "So now, in the most purchase-dominant market we’ve seen this century, we need to ask whether the shift in originations will have any impact on mortgage performance. The short answer, based on historical trends, is that it certainly bears close watching."
The report also analyzed mortgage prepayments and revealed that they were at a 10-year low in November, with prepayment activity among higher credit score borrowers (720-plus) down 58 percent from two years ago. It indicated that prepays among borrowers with credit scores of less than 620 were down only 14 percent over the same period. Higher credit score borrowers were also pulling out cash less frequently despite holding the bulk of the nation's home equity, suggesting that though equity was more likely to be held by high credit score borrowers, those with lower scores were more likely to make use of it.
Looking at home prices, the report indicated that annual gains in prices decelerated by 1.3 percent over the past eight months from a four-year high of 6.7 percent in February to 5.4 percent in October. It revealed that home price growth had slowed in 33 states and 71 of the nation's largest markets, with California seeing the most evident changes.
Click here to read the full report.