Lower demand for refinancings has caused purchase loans to take a larger share of the market. (iStock)
The once red-hot mortgage market is cooling down.
Mortgage demand fell in April to its lowest level in almost a year, according to Inman, citing a report from the data firm Black Knight.
The reason: refinancings have fallen off. Cash-out refinancings were down 13 percent from March to April, while rate-and-term refinancings plummeted 20 percent, per the report. Black Knight says there are 14.5 million homeowners who could still refinance their existing mortgage at a lower rate.
Lower demand for refinancings has caused purchase loans to take a larger share of the market. Those made up 55 percent of total originations in April, up from 52 percent in March, according to Black Knight.
Historically low mortgage rates have been the norm for some time now, but that may soon end. Economists at Fannie Mae project rates on 30-year fixed-rate mortgages to reach 3.4 percent by end of 2021 and then rise to 3.6 percent in 2022. That’s up from 3.1 percent last year.
Lenders have also been tightening their standards in the past year. Overall, mortgage credit availability — an indicator for lenders’ willingness to issue mortgages — is at its lowest level since 2014, according to recent data from the Mortgage Bankers Association.
Last year, mortgage rates plunged to historic lows, encouraging would-be buyers into the market and spurring refinancings. (Rates have since gone up.) But the availability of loans dropped 35 percent year-over-year as lenders tightened standards to avoid lending to buyers with shaky finances.
[Inman] — Keith Larsen
