ICE Report: Mortgage originations at lowest rate in 30 years in 2023

Mortgage originations hit a 30 year low in 2023, according to the Intercontinental Exchange’s ICE Mortgage Monitor Report.

The report said that just 4.3 million mortgages were originated in 2023, the fewest in the 30 years that ICE has been tracking the metric.

“Since 1995, only two quarters have seen fewer than 1 million first lien mortgages originated,” Walden said. “The first was Q1 2023, and Q4 the second. Looking back, last year’s market was dominated by purchase lending, with loans to buy homes making up 82% of an historically low number of originations. While it remains a tough market for prospective purchasers, our eMBS agency securities database revealed that first-time homebuyers actually made up 55 percent of all agency purchase mortgages last year. That’s the highest share in the 10 years we’ve been tracking the metric,” Andy Walden, ICE vice president of enterprise research strategy, said.

Walden added that first time home buyers (FTHB) purchase loans accounted for an exceptionally high share of all issuance activity last year.

“They made up 39 percent of all GSE securitizations in 2023 – 12 percentage points higher than any other vintage in the past decade. The market in which these folks purchased their first home was one of record house prices, ballooning down payments, rising rates and elevated DTIs (debt-to-income). Given record exposure to first-time homebuyer loans, it’ll be worth watching the performance of this cohort very closely moving forward, particularly for those invested in 2023 agency MBS.”

The report indicated that demand in the mortgage market continues to closely follow rate movements and remains largely purchase driven. If industry rate projections hold firm, said walden, there could be a slight surge of refi activity by the end of 2024.

“Even the relatively slight rate pullbacks of December and January spurred a growing number of homeowners to refinance. Demand is clearly there when rates cross certain thresholds and, if current rate forecasts hold true, we expect that demand to increase throughout the year. Unfortunately, when it comes to retaining the business of refinancing homeowners, the industry has a lot of ground to make up. Servicers retained just one of every five such borrowers in Q4 2024, a 17-year low,” Walden said.

He said that for mortgage lenders, providing an exemplary servicing experience is critical to reversing this trend, along with effectively identifying and engaging with customers likely to refinance.

“And when they have the opportunity to serve that customer, lenders need to be sure the front-end of the process is smooth as well,” Walden added.

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