For large parts of the past two years, mortgage refinancing has been booming, as historically low mortgage rates and surging home prices created an opportunity for existing homeowners to save a lot of money on their mortgage and, in many cases, even take out some cash in the process. That trend is now winding down, as mortgage rates have risen steeply since the start of the year.
According to Freddie Mac estimates, mortgage originations peaked at $1.3 trillion in Q1 2021, with refinances accounting for 70 percent of that historic total. Refinancing volume remained high throughout 2021, hitting a total of $2.8 trillion for the year. In 2021, existing homeowners cashed out $248 billion in home equity, marking the highest level since 2007.
In Q2 2022, refinancing originations amounted to just $212 billion, down more than 75 percent from the Q1 2021 peak. With mortage rates recently hitting the highest level since 2008 and no real end in sight, refinances are expected to stay low through at least 2023. Meanwhile the volume of purchase originations remains high for the time being, as elevated home prices force buyers to take on higher loans.