Homeowners Get in Front of Rising Rates at Year-End

Homeowners seized the opportunity to refinance their mortgages at the end of 2016, locking in interest rates on the uncertainty whether they would rise higher in the new year.

According to ATTOM Data Solutions’ Q4 2016 U.S. Residential Property Loan Origination Report, 883,836 refinances totaling $246 billion were originated in the fourth quarter of 2016, a 20 percent increase—and 27 percent increase in dollar volume—from the previous year. Purchase originations moved opposite: 595,000 totaling $161 billion, a 12 percent decrease from the previous year.

“Refinance originations continued to post strong numbers compared to a year ago in the fourth quarter, even as purchase originations decreased on a year-over-year basis for the second consecutive quarter,” says Daren Blomquist, senior vice president at ATTOM Data Solutions. “The increase in refinance originations is surprising given the rising interest rates in the fourth quarter, but many homeowners may have been trying to lock in still relatively low interest rates before those interest rates rose further.”

The biggest increases in refinance originations in the fourth quarter occurred in Olympia, Wash. (a 108 percent increase), Spokane, Wash. (77 percent), Boulder, Colo. (74 percent), San Diego, Calif. (73 percent), and Eugene, Ore. (72 percent)—areas generally with higher home values. Olympia and Spokane also saw the biggest increases in purchase originations, at a 27 percent increase and 18 percent increase, respectively.

The biggest decreases in purchase originations in the fourth quarter occurred in Naples, Fla. (a 23 percent decrease), Austin, Texas (20 percent), Fort Collins, Colo. (19 percent), San Antonio, Texas (18 percent) and Reno, Nev. (15 percent).

FHA and home equity line of credit (HELOC) originations also decreased in the fourth quarter, 9 and 12 percent from the previous year, respectively, while VA originations increased 23 percent.

“Rising interest rates did seem to have a chilling effect on homebuyers using financing, as evidenced not only by the drop in purchase loan originations but also a corresponding rise in the share of cash buyers, drop in FHA buyer share and a rise in the average down payment percentage in the fourth quarter compared to the previous quarter,” Blomquist says. “For the year, the median down payment for loans secured by single-family homes and condos was 6 percent of the median sales price nationwide, the lowest down payment percentage since 2012, but still close to twice the 3.3 percent in 2006 during the last housing boom.”

More than 3.3 million refinances and over 2.7 million purchases were originated in all of 2016, according to the report.

Source: ATTOM Data Solutions

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