Despite an improved outlook for refinance mortgage originations earlier this year, recently rising rates are cutting into a potential refinance wave.
U.S. home lenders generated $1.761 trillion in residential loan originations during all of 2015. The total included refinances and purchase financing.
Overall business improved compared to the previous year, when loan production by the nation’s mortgage bankers amounted to $1.342 trillion.
Black Knight Financial Services discussed the details in its Mortgage Monitor January 2016.
Purchase-money lending accounted for $0.948 billion of last year’s total, an improvement over the $0.812 billion in purchase financing reported for 2014.
The remaining $0.813 trillion for 2015 came from refinance originations, far better than the $0.530 trillion a year earlier.
“A clear deceleration was seen in both purchase and refinance originations in Q4 2015,” the report stated.
Still, purchase production was up 5 percent on a year-over-year basis in the final quarter of last year.
Purchase originations were up 25 percent in Arkansas compared to the fourth-quarter 2014 — the biggest gain of any state. Iowa saw a 22 percent rise, followed by 20 percent in both Mississippi and Wyoming and 17 percent in Washington.
A 31 percent year-over-year decline in Alaska was the worst performance of any state.
The report indicated that the 30-basis-point drop in 30-year fixed rates during the first-six weeks of this year — to around 3.65 percent — has left 6.7 million U.S. borrowers with an incentive to refinance.
Black Knight noted that if 30-year rates were to fall to 3.50 percent, the
number of borrowers with an incentive to refinance would jump to 8.8 million.
But interest rates have since risen to
3.64 percent as of the week ended March 3, and the 10-year Treasury yield is up roughly another seven basis points since then — cutting the number of refinance prospects.
