Industry Trends: Mortgages (4Q19)

Borrowers were incentivized to look for refinancing opportunities in the second half of 2019. With refinances projected to outweigh purchases through the first quarter of 2020, credit unions are primed for a strong start to the decade.

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.

April 16, 2020

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