Housing News

New Data Suggests Mortgage Industry on Track for Best Year Ever

While much of the economy suffered in the wake of the pandemic, historically low interest rates are continuing to drive both home purchases and refinances. New data suggests that the mortgage business is going to have the best year it's ever had.

A new report from Black Knight shows that not only is the third quarter of this year on track to be the best quarter in mortgage business history but the overall year is also set to break records.

Black Knight examined interest rate lock data, an indicator of lending activity, and found that Q3 mortgage originations are likely to break quarterly records for refinance purchase and total lending volume.

According to Black Knight, estimated origination volumes based on rate lock data show that Q3 refinance and total originations could be up by at least 25% over the second quarter, while purchase lending may be up by 35% or more.

If those totals are correct, it would likely mean that purchase lending this year will be higher than it's been in any year since 2005. Beyond that, the data shows that refinance and total origination volumes are on track for their highest levels ever.

According to Black Knight's data, total lending is now expected to exceed $4 trillion for the first time.

"Rate lock data from Black Knight's Compass Analytics division shows that Q3 2020 mortgage originations are on track to break quarterly records across the board and remain strong moving into Q4," Black Knight Data & Analytics President Ben Graboske said.

"This suggests that origination and prepayment activity will likely remain elevated well into Q4 2020. September lock activity held relatively level with August, but through October 19, lock activity overall is up 4% from the month prior – with purchase locks up 6% and refinance locks up 3% thus far," Graboske added. "Interest rates setting new record lows in mid- and late-October will likely continue to fuel lock activity in coming weeks."

Beyond low interest rates, rising home prices also contribute mightily to the likely record-breaking year.

According to Black Knight's data, home price appreciation has "remained remarkably robust" throughout much of this year. Black Knight notes that the annual home price growth rate slowed to 0% in May, which was the first time that home prices were stable year-over-year since 2012.

Since then, the home price growth rate has "skyrocketed," thanks to those low interest rates, improved affordability, and a "severe" shortage of homes for sale. Black Knight's report shows that August showed an annual home price growth of 11.5%, while annual appreciation rose to a "startling" 14.2% in September, the highest such growth rate in more than 15 years.

And it looks like things aren't going to slow down any time soon either.