Purchase lending during the second quarter reached its highest level since 2007 while the refinancing share of the market dropped to a 16-year low, according to new data from Black Knight Financial Services (BKFS)
The second quarter saw $467 billion in first lien mortgages—covering both purchase and refinance loans—up 20 percent from the first quarter but down 16 percent from the second quarter of 2016. The second quarter saw a $37 billion drop in refinances and a $117 billion spike in purchase lending over the first quarter. As a result, refinances accounted for 31 percent of all mortgage originations in the second quarter, the lowest share since 2000, which purchase lending was at a 10-year high.
Black Knight Data & Analytics Executive Vice President Ben Graboske noted that borrowers with credit scores of 720 or higher accounted for 74 percent of the second quarter’s purchase loans.
“Today, there are 65 percent fewer purchase loans being originated to borrowers with credit scores below 720 than in those years,” Graboske said. “The lack of credit availability for those borrowers is causing a strong headwind for the purchase market. Using 2000-2003 averages as a measure, as many as 645,000 purchase loans were not originated in the second quarter due to tighter lending standards. To put it another way, the purchase market is operating at less than two-thirds of peak capacity because of these factors.”