Mortgage Lending Plummeted In Q4 2023

Mortgage brokers felt the burn in the last three months of 2023, with residential lending across the board stalling.

A new report from ATTOM found that 1.35 million residential mortgages were originated in Q4 2023. That’s a 13.8% drop from Q3, and the tenth decline in the last eleven quarters.

Residential lending activity overall was down 16.5% YOY, with purchases, refinances, and home equity loans all taking a hit. 

Compared to the boom of Q1 2021, activity is down more than 67%.

“Multiple powerful forces continued to conspire against the mortgage industry during the fourth quarter, slicing back huge portions of their business,” said Rob Barber, CEO at ATTOM.

“There were signs during the peak buying season of 2022 that things were starting to turn around, with increases in purchase, refinance, and HELOC deals. That could happen again this year as we head into this year’s peak period, especially with interest rates coming down recently. But the fourth-quarter numbers revealed continued gloomy times for lenders, no matter how you sliced the pie.”

The beginning of 2024 saw rates stabilizing in the mid-6’s, leading to increased purchase and refi activity.

But rates are sneaking up again, with averages reported by Freddie Mac skirting 7% this week, and buyers are responding. Applications have been on the decline for weeks.

January inflation data has put upward pressure on rates. The Fed’s preferred inflation index came in hotter than expected, and Wall Street pared back its bets on rate cuts from the Central Bank, now predicting they won’t come until at least May.

“The much-anticipated CPI report is a disappointment for those who expected inflation to edge lower allowing the Fed to begin easing rates sooner rather than later,” Quincy Krosby, chief global strategist at LPL Financial, said. “Across the board numbers were hotter than expected making certain that the Fed will need more data before initiating a rate cutting cycle.”

Buyers are beginning to see the light at the end of the tunnel and expect rates to decline in the next twelve months. But for now, upward momentum is keeping them sidelined.