Mortgage lending dropped at its fastest pace in almost three years in Q4 2021, down for the third quarter in a row and the largest decrease since late 2018, according to ATTOM’s Q4 2021 U.S. Residential Property Mortgage Origination Report.
The report found that 3.27 million mortgages were originated in Q4 2021, or $1.06 trillion worth of mortgages. This is down 11% from Q3 2021 and 13% from Q4 2020.
All three categories of conventional loans– purchase, refi, and home equity– saw quarterly declines, with only purchases remaining up year-over-year (YOY).
Refis were down 11% from Q3 2021 and 23% YOY, with 1.81 million home loans refinanced. Q4 was the third straight quarter of refi declines. The dollar volume of refis was down 9% from Q3 and 18% YOY, to $578 billion.
“The receding volume of business for the residential mortgage industry is now showing up across all major categories of loans and appears to be more than just a temporary slide. The ebbing wave of refinance loan that started in early 2021 has fully spread to home-purchase and home-equity lending,” said Todd Teta, chief product officer at ATTOM.
“No doubt, total lending levels are still up over normal amounts over the past decade. And the drop-off in purchase loans seems to flow from a lack of housing supply rather than the housing market boom ending. But declining business for lenders remains a key point to watch in assessing the state of the market, especially with interest rates likely to climb this year.”
Stock shortages have forced bidding wars to their highest level since at least April 2020, with 70% of home offers from Redfin agents facing competition in January. With a record-low number of homes for sale, purchase applications have fallen to their lowest point since December 2019.
The industry is bracing for impending layoffs as the market adjusts, especially with refinances drying up and rates increasing. Companies such as Interfirst Mortgage and Freedom Mortgage have already begun letting employees go.
“With rates moving higher, capacity is going to be adjusted across the entire industry,” Jeff DerGurahian, chief capital markets officer at LoanDepot Inc., told Bloomberg.