Mortgage Lending Falling Back from Historic Highs

The first quarter of this year was the best quarter for the mortgage lending industry in 20 years. However, those heights have not been sustainable as mortgage lending has fallen back a bit in each of the two quarters since then.

According to a new report from ATTOM Data Solutions, there were 3.59 million mortgages originated in the third quarter of this year. That’s up 3% from the same time period last year, but down 8% from the second quarter. That’s the largest quarterly drop in more than a year, ATTOM said.

It also marks the second straight quarter that the number of originations has fallen. According to ATTOM, declines in two straight quarters haven’t happened in more than two years.

Beyond that, this marks the first time in any year since at least 2000 that lending activity declined in both the second and third quarter.

Overall, lenders issued $1.15 trillion in mortgages in the third quarter, up 11% over last year, but down 6% from the second quarter. According to ATTOM, that’s the first quarter decrease in lending volume since the early part of 2020.

Both purchase and refinance loans were down in the third quarter, per ATTOM’s report. Refis fell by 13% from the second quarter, while purchase mortgages were down by just 2%.

As for why lending is slowing down from its historic highs, Todd Teta, chief product officer at ATTOM, said there are multiple factors in play.

"The overflow stack of work that was hitting lenders for several years shrank again in the third quarter across the U.S. amid a few emerging trends," Teta said.

"It looks more and more like homeowner's voracious appetites for refinance deals has eased notably, while purchase lending also dipped. It's still too early to say if the trends point to major shifts in lending patterns or the broader housing market boom,” Teta added.

“But the drop-off is significant, especially for home buying, which could suggest an impending housing market slowdown,” Teta concluded. “We will be watching the lending trends extra closely in the coming months."