The Federal Reserve cut rates in the second and third quarter of 2019, pushing the average rate of 15-year and 30-year fixed-rate mortgages down. The average rate of a 30-year fixed-rate mortgage decreased 81 basis points annually to 3.74%, accordingto Freddie Mac. The average rate of a 15-year fixed-rate mortgage fell 82 basis points to 3.19%.
The Mortgages Bankers Association reported refinances accounted for 50.7% of all mortgage originations in the fourth quarter. That’s up from 25.8% last year. The group projects a refinance-heavy dynamic will continue through the first quarter of2020 as borrowers continue to seek the benefits of loan repricing.
Key Points
- Credit unions originated $178.7 billion in first mortgages in 2019. That’s more than any year on record and 28.4% higher than the year prior.
- Fixed-rate mortgages totaled $127.5 billion and accounted for 71.4% of all year-to-date first mortgage originations. This is the highest level of fixed rate production of any year in history.
- Outstanding first mortgage balances increased 9.4% year-over-year to $472.4 billion at year-end 2019. This was the highest annual growth rate of any loan product. First mortgages made up 42.2% of the loan portfolio.
- In 2019, the average first mortgage loan balance at credit unions was $159,492. According to HMDA, banks and other mortgage finance companies averaged $273,200 in 2018, evidence that credit unions are serving lowerincome members.
- At 0.55%, first mortgage delinquency remained steady during the year. First mortgage delinquency has historically been lower than for the overall loan portfolio, for which delinquency was 0.71% at year-end.
1ST MORTGAGE ORIGINATIONS & MARKET SHARE
FOR U.S. CREDIT UNIONS | DATA AS OF 12.31.19
Callahan & Associates| CreditUnions.com
First mortgage originations in 2019 were the highest ever recorded for credit unions in a calendar year.
MORTGAGE ORIGINATIONS BY TYPE
FOR U.S. CREDIT UNIONS | DATA AS OF 12.31.19
Callahan & Associates | CreditUnions.com
Fixed-rate mortgages accounted for 71.4% of first mortgage originations at year-end 2019. That’s up from 63.6% in 2018.
AVERAGE 1ST MORTGAGE DELINQUENCY
FOR U.S. CREDIT UNIONS | DATA AS OF 12.31.19
Callahan & Associates | CreditUnions.com
First mortgage delinquency held steady at 0.55% during the past 12 months. This is the lowest year-end rate since 2006.
The Bottom Line
Declining rates in the back half of the year have incentivized borrowers to look for refinancing opportunities, a dynamic that has favored credit unions in the past. With refinances projected to outweigh purchases through the first quarter of 2020, creditunions are primed for a strong start to the decade.
This article appeared originally in Credit Union Strategy & Performance.