Mortgage originations in the U.S. 2012-2021, by type
Purchase loan mortgage originations in the fourth quarter of 2021 amounted to 424 billion U.S. dollars and refinance loan mortgage originations amounted to 469 billion U.S. dollars. Refinance loans were more popular than purchase loans for a long time until this trend changed in early 2014, but refinance loans regained their popularity in the final quarter of 2019.
Purchase vs refinance loans
A purchase loan is the classic type of mortgage which describes the process by which a home buyer borrows money from a mortgage lender. On the other hand, a refinance loan is obtained by homeowners to replace their existing mortgage with a new loan, which usually reduces the monthly payments, the interest rate or changes it to a fixed rate mortgage.
Why the trend has changed
The value of refinance loans had been falling since mid-2013, because the Federal Reserve had been continuously increasing the interest rate since 2014. However, the Fed dropped the funds rate three times in 2019 in response to the inverted yield curve in March, which accounts for the increase throughout 2019.
Purchase vs refinance loans
A purchase loan is the classic type of mortgage which describes the process by which a home buyer borrows money from a mortgage lender. On the other hand, a refinance loan is obtained by homeowners to replace their existing mortgage with a new loan, which usually reduces the monthly payments, the interest rate or changes it to a fixed rate mortgage.
Why the trend has changed
The value of refinance loans had been falling since mid-2013, because the Federal Reserve had been continuously increasing the interest rate since 2014. However, the Fed dropped the funds rate three times in 2019 in response to the inverted yield curve in March, which accounts for the increase throughout 2019.
