Americans rush to refinance as mortgage rates keep rising

While homeowners surged into the market, increasing refinance originations, potential homebuyers held back in the third quarter, according to the Q3 2016 U.S. Residential Property Loan Origination Report by ATTOM Data Solutions, a fused property database.

Overall, over 1.9 million loans were originated in the U.S. in the third quarter of 2016. That’s down 2% from the second quarter, but up almost 1% from last year. The total dollar volume of loan originations increased 8% from last year to over $502 billion due to higher average loan amounts.

The loan origination report is derived from publicly recorded mortgages and deeds of trust collected by ATTOM Data Solutions in more than 950 counties accounting for more than 80% of the U.S. population.

“The nominal increase in overall originations compared to a year ago masks divergent refinance and purchase loan origination trends during the quarter,” said Daren Blomquist, ATTOM Data Solutions senior vice president. “Refinance originations increased 16% compared to a year ago while purchase originations were down 11% and Home Equity Lines of Credit originations were down 6%.”

“Uncertainty surrounding the outcome of the presidential election may have kept some would-be homebuyers on the sidelines while the prospect of rising interest rates following the election may have prompted many homeowners to refinance to lock in low interest rates,” Blomquist said.

In the third quarter, 876,633 refinances loans were originated. That is an increase of 7% from the second quarter, and 16% from last year. Refinance originations made up 45.7% of total originations during the third quarter, up from 42.1% last quarter and 39.5% last year.

Many homeowners are rushing to refinance their homes before interest rates increase. While rates are currently still at historical lows, the 30-year mortgage rate recently hit its highest point since July 2015.

On the other hand, purchase originations totaled 743,880 during the third quarter. This is down 8% from last quarter and 11% from last year. This is the first decrease after nine months of consecutive annual increases in purchase originations. Purchase originations totaled 38.8% of all originations, down from 41.4% last quarter and 43.8% last year.