Mortgage originations are falling and will continue to do so in 2019, but rising home prices could cause an increase in homeowners seeking to tap into their equity, according to the 2019 consumer credit forecast from TransUnion.
TransUnion forecasted that overall, originations to subprime or near prime borrowers will increase in 2019 as lenders grow more comfortable with risk. Mortgage originations, however, will not fall under that trend. TransUnion predicts originations to subprime borrowers will rise only .3 percentage points to 3.9%.
But mortgage originations to all borrowers have been declining the past several quarters, and they will continue to do so in 2019, the forecast showed. Rising interest rates, increasing home prices and supply constraints are driving the lower origination numbers.
“While overall originations will be down in 2019, increases in home prices are resulting in record levels of home equity, which provide homeowners more opportunities to tap into low APR home equity products,” said Joe Mellman, TransUnion senior vice president and mortgage line of business leader. “This will particularly benefit consumers deciding pay off other higher interest rate products – as well as consumers finding it difficult to afford a new ‘move up’ house, who instead opt to invest in improving their existing home.”
Average mortgage origination balances will continue to trend upward in 2019, growing from an anticipated $208,831 at the end of the fourth quarter this year to $218,490 by the end of the fourth quarter in 2019, a 4.6% increase. This will be largely driven by increased prices for newly purchased homes, a drop in the refi share, and a potential shift in purchase mix.
But while TransUnion predicts more homeowners will be tapping into their equity, a recent Mortgage Monitor report from Black Knight shows that, after hitting several record highs, tappable equity, the amount available for homeowners with mortgages to borrow against before hitting a maximum 80% combined loan-to-value ratio, fell for the first time since the housing recovery began.
TransUnion also forecasted that delinquencies will continue their downward trend, falling from an anticipated 1.62% by the end of 2018 to 1.45% by the end of 2019. Delinquencies have fallen year over year every quarter since TransUnion started tracking in 2010.