Mortgage origination volumes in early 2024 increased annually for the first time in three years,
In its previous quarterly credit report, Transunion reported business rising for Federal Housing Administration-backed mortgages, often attractive to first-time buyers as well as borrowers with lower credit scores.
Loan originations overall came in at approximately 915,000 in the first quarter, increasing by 1.8% from 899,000 a year earlier.
Still, the annual uptick represented a turnaround from the fourth quarter, which saw an 11% annual drop in volume.
"After reaching two-decade highs in 2023, mortgage rates have moderated slightly over the first half of 2024, a likely factor in the modest originations gains," said Satyan Merchant, senior vice president, automotive and mortgage business leader at Transunion, in a press release.
Amid the early-year backdrop of declining rates, the refinance share of the market grew to 15.6% from 11.7% in the fourth quarter. Refinances garnered 13.4% a year earlier.
"With a contracting monetary policy anticipated in the second half of 2024 due to easing inflationary pressure, mortgage rates are expected to decline further by the end of the year, which could further stimulate the mortgage market," Merchant added.
Alongside increased refinance interest,
FHA-backed originations nabbed a larger slice of the mortgage market in the first quarter, with a 19.7% share compared to 17.9% a year earlier. The share of originations guaranteed by Fannie Mae and Freddie Mac also expanded marginally to 36.8% from 36.4%.
The average loan amount sustained its upward trend of the past three years, coming in at $339,232, up 4% from the mean 12 months earlier of $326,214. Over a three-year stretch, though, new mortgage origination balances have increased by 14% from $297,534.
Outside of their mortgages, homeowners possessed $748 billion in debt in the first quarter, up by 11% year over year, with an average of $8,000 each.
As rapidly accelerating mortgage rates applied downward pressure on mortgage lending, especially refinances, since 2022, home equity lines of credit and other loans using property as collateral saw renewed interest.
But with rates moderating early this year, liens backed by home equity decreased 4% annually, Transunion said. Historically, though, HELOC originations were still comparable to pre-pandemic levels, while home equity loans remained well above their levels between 2008 and 2021.
Elsewhere within the credit industry, super prime borrowers drove elevated lending, much as they did for mortgage bankers, Transunion also found in its quarterly report.
"Lower risk super prime, in particular, originated more this quarter in areas such as credit cards and auto," noted Michele Ranieri, Transunion's vice president of U.S. research and consulting. Across products, consumers seemed willing to use credit available to them, with balances growing among borrowers in a range of score bands, she added.
Whether credit usage stays on its upward trajectory over the long term depends on consumer response to the Federal Reserve's upcoming moves, as well current economic slowing leading up to it.
"It remains to be seen how these numbers will change if and when the Fed lowers interest rates later this year," Raniei said.
