Is it Officially a Purchase Market Now?

For well over a year, the mortgage market has been dominated by refinances, a function of interest rates hitting lows that were previously unheard of and staying that way for most of 2020. But it looks like those days may soon be in the rearview mirror.

In fact, new data shows that the mortgage market may be shifting toward purchase originations and away from refinances.

According to a new report from Black Knight, purchase loans made up a majority of originations in March, the first time that’s happened in 15 months.

Per Black Knight’s data, 52% of the originations in March were for purchase mortgages, while 48% of the originations were refis. That’s the first time there were more purchase originations than refis since December 2019.

According to Black Knight, the shift towards a purchase-driven market came as interest rates increased over the course of the month. Black Knight’s data showed that the industry average conforming 30-year interest rate at the end of March was 3.34%, up almost 60 basis points (0.60%) from February.

As a result of the increasing interest rates, rate and term refinances were down more than 26% from February.

However, overall lock volume was up 2.5% in March, driven primarily by purchase locks, which were up 32% over February.

Overall, purchase locks are up nearly 70% since the start of 2021, signaling a shift away from refis and toward purchase mortgages.

“(March) marks the first time -- but almost certainly not the last -- that purchase loans have made up a majority share of monthly mortgage lending since December 2019,” Black Knight Secondary Marketing Technologies President Scott Happ said. “We also saw credit scores pull back, a trend that's likely to continue among refis as high-credit borrowers, who have been largely driving record volumes, exit the market.”