Q3 Mortgage Lending Declines as Rates Climb

Attom Data’s latest report, the third quarter 2023 U.S. Residential Property Mortgage Origination Report, found that during the third quarter of this year, the industry generated 1.54 million residential property, a full 3% decline from the second quarter, which in turn results in a whopping 26% drop year-over-year.

This downturn comes amid increases in mortgage rates, home prices, and a lack of consumer confidence.

Lending activity resumed its extended downturn during the third quarter with a mix of gains and losses in major categories of residential lending, as growth in refinance activity was more than offset by drops in purchase and home-equity lending. The number of refinanced loans increased 5% quarterly, to roughly 516,500, while lending to home buyers went down 7%, to about 752,000. Home-equity credit lines also dipped 7%, to 272,000.

Measured monetarily, lenders issued $482 billion worth of residential mortgages in the third quarter of 2023. That was down 4% from the second quarter of 2023 and 28% from the third quarter of last year.

Despite the third-quarter shifts, the portion of all residential mortgages represented by different kinds of loans remained roughly the same compared to the second quarter. Purchase loans still comprised about half of all mortgages issued during the third quarter, while refinance packages made up one-third and home-equity loans just under 20%. However, that remained far different from two years ago, when refinance deals comprised two-thirds of all activity and purchase loans just a third.

“The mortgage industry took another hit in the third quarter as the spike in residential lending during the Spring turned out to be temporary,” said Rob Barber, CEO at ATTOM. “Refinance deals stood out as the lone bright spot. That seemed a bit odd given that interest rates went up, but may have stemmed from homeowners pulling cash out of their growing equity. Overall, the impact of higher rates and other forces working against borrowers remained striking, resulting in total loan activity still off by a remarkable two-thirds over just two years.”

Barber added that “the typical housing market slowdown during the Fall is likely to further reduce purchase lending in the immediate future, while borrowing by homeowners should hold fairly steady if projections for stable interest rates turn out to be accurate.”

Click here to view more data revealed by the report.