For most of the last two years, the mortgage market has been dominated by refinances thanks to persistently low interest rates. But the market seems to be shifting back to purchases this year.
According to a new report from TransUnion, purchase mortgage originations exceeded refinances in the second quarter, which was the first time that has happened since March 2020.
The report shows that purchase originations made up 53% of all originations in the second quarter, up significantly from 43% in the second quarter of 2020.
According to TransUnion, the reversal was caused by “slowed refinance demand,” with rate and term refinances declining by 23% year-over-year.
Overall, mortgage originations grew in the second quarter, climbing 7% over the same quarter last year.
Among loan types, FHA and Jumbo loans saw the largest increases. According to TransUnion, Jumbo loans grew by 37% in one year, while FHA loans were up 16%.
With the increase in originations in the second quarter, the total mortgage balance for all borrowers rose by 8% to a record high of $10.5 trillion.
“Following several quarters of hyper growth, activity in the mortgage market has started to slow,” said Joe Mellman, senior vice president and mortgage business leader at TransUnion.
“We expect the trend of home purchases to continue to overtake refinance, especially if consumer demand for homes stays strong and inventory improves,” Mellman continued.
“This is assuming mortgage rates continue to rise, which will cause refinances to decline,” Mellman concluded. “At a generational level, origination growth was most pronounced for Gen Z consumers and we expect this to continue as that generation ages and they look to enter the housing market and become home buyers for the first time.”