Mortgage lenders are refocusing on home buyers to drum up business during a slowdown in refinancing.
Purchase mortgages made almost half of the loan backed securities sold into government-backed securities and packaged to investors in the third quarter, according to Inside Mortgage Finance, an industry research group. That is the highest share since before the Pandemic Low Interest Rates and which ignited a record of refinance.
Last year and the first half of this year, we were flat out with refis, and the phones would t stop ringing, said Michael Menatian, owner of Sanborn Mortgage Corp. in West Hartford, Conn. That pretty much ends now. A still hot housing market means many buyers need money to get new homes organized and close. But rates have ticked up recently, curtailing the number of people who could lower their rates or shave time off their mortgages by refinancing.
The average fixed 30-year fixed mortgage rate rose to 3.05% last week, according to Freddie Mac, the highest level since April although still low by historical standards.
The shift means home buyers are better positioned to negotiate a lower interest rate, says Sam Polland, loan officer at Intercoastal Mortgage LLC in Potomac, Md.
Lenders still packaged up hundreds of billions of dollars of refinance loans last quarter. But business is harder to come by these days, Mr. Menatian said. Instead of taking inbound calls, he has been calling clients whose home values have risen enough that they can refinance out of their mortgage insurance policies.
Rising rates could pose challenges to lenders whose growth during the pandemic mortgage boom depended heavily on refinancing. At the same time, lenders that focus more on the purchase market have thrived recently.
U.S. Bank was, for example, making almost half of its mortgages to buyers in the first six months of this year, according to Inside Mortgage Finance. It was more than $28 billion in the third quarter, the most in years and up 11% from one year ago.
The bank should continue to benefit from strong home sales because it focuses more on purchase mortgages, Chief Financial Officer Terry Dolan said on a call with analysts Thursday.
Rocket Cos., the country's largest mortgage lender, extended 10% of all refi in the first half of the year. Over that period Refis played for 88% of the company s mortgage business.
The company wants to become the largest retail purchasing lender by 2023, Chief Executive Officer Jay Farner said in August. Its stock is down 18% this year.