Mortgage lending activity contracted by 50% in 1Q

Mortgage lending screeched to a deafening halt in the winter, with a mere 1.25 million mortgages originated in the first quarter of the year, per a report published by Attom Thursday. But there's hope for a ramp up in the warm months ahead.

According to the data vendor report, the number of loans made in the first three months of the year came in 19% lower than the previous quarter and was the eighth consecutive quarterly decline of origination activity.

Purchase, refinance and home-equity lending was down a whopping 56% from the year before, and came in 70% below from a peak reached in the first quarter of 2021 when over four million mortgages were originated. Refi activity was at the lowest level seen in a century, Attom's report found.

The sharp drop-off in lending activity stemmed from elevated mortgage rates, which were hovering near 6.5% in February, consumer price inflation and other signs of economic uncertainty, the report stated.

During this time, lenders "saw opportunities dwindle even more…as the longest slowdown in mortgage activity in at least 20 years continued," said Rob Barber, chief executive officer at Attom, in a written statement. This likely contributed to the workforce reductions seen across the mortgage industry.

Almost 600,000 loans were originated for home purchases in the first quarter, a 19% dip from the fourth quarter and a 44% decline from the first quarter of 2022. The dollar volume of purchase mortgages dropped 18% quarterly and 45% annually, to $216 billion, the data vendor's report found.

On the refinance side, a little over 400,000 mortgages were made, marking an 85% decrease from the first quarter of 2021. Attom's report noted that this is the smallest number of refis seen this century. 

Home-equity lending dropped 23% in the first few months of 2023, to a total of 245,071 loans. The decline marked the second quarterly decrease following a year and a half of gains.

Barber noted that while the overall tendency for origination volume to be lower in the winter is not unusual, the situation that unfolded in the first quarter was by far more dramatic. 

"In one sense, it wasn't that unusual, given that wintertime is usually the slow time of the year for lenders. But the latest slide extends a run that started two years ago and has carved away nearly three-quarters of the home-mortgage business," he said. "Things remain uncertain in the near future, with the potential for interest rates and inflation to go either way, but the Spring buying season will be a key indicator of whether things may turn around."