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Mortgage Lending Drops Sharply in Third Quarter

December 2, 2021

Mortgage lending declined at an unusually fast pace across the country during the third quarter, according to a newly released report from ATTOM Data Solutions on mortgage originations. The percentage of mortgages secured by a residential property in the third quarter slipped by 8% compared to the second quarter, the largest quarterly dip in more than a year, researchers note. This also marked the first time in any year since at least 2000 that lending activity declined in both the second and third quarters, which usually are peak buying seasons, according to housing analysts.

Refinance and purchase lending are slowing as mortgage rates rise. Refinances fell 13% in the third quarter compared to the second quarter and are down 3% compared to a year earlier. The quarterly decreases in refinance applications have been the largest in three years. As mortgage rates move higher, homeowners have less incentive to refinance. Refinance mortgages make up the majority of all residential lending activity.

The number of purchase loans is also declining, however. Lenders issued 1.36 million mortgages to home buyers in the third quarter, down 2% quarterly but still up annually by 17%, ATTOM Data Solutions reports.

Meanwhile, home equity lending increased for the second consecutive quarter. More homeowners are taking advantage of the equity they’ve accumulated in their homes. But the overall dip in total loan activity in the third quarter may be a sign that the nation’s appetite for new home loans is easing, researchers say.

“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,” says Todd Teta, chief product officer at ATTOM. “It looks more and more like homeowners’ 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. But the drop-off is significant, especially for home buying, which could suggest an impending housing market slowdown. We will be watching the lending trends extra closely in the coming months.”

Areas Posting the Largest Drops

Lending activity fell in the second quarter compared to the third quarter in 86% of the 216 metro areas that ATTOM Data Solutions tracked. Total lending activity dropped by at least 5% in 58% of the metros.

The largest quarterly decreases in the third quarter were in:

  • Pittsburgh: down 52.3%
  • Charleston, S.C.: down 48.2%
  • Myrtle Beach, S.C.: down 46.8%
  • Provo, Utah: down 39.5%
  • Peoria, Ill.: down 33.9%