A mortgage application form is torn in half.
Illustration by Lanette Behiry/Real Estate News; Shutterstock

Mortgage activity at a 2-decade low 

A report from ATTOM found that elevated interest rates put a freeze on residential mortgages, refis and HELOCs in the first quarter of 2023.

May 31, 2023
3 minutes

Key points:

  • Between the end of 2022 and the beginning of 2023, loan activity dropped 19%.
  • Even home equity lines of credit, which had been propping up lending activity, were down 23.1% compared to the previous quarter.

With elevated interest hampering affordability, lending activity has hit the lowest levels in more than two decades.

Real estate data provider ATTOM estimates 1.25 million residential mortgages were completed in the first quarter. According to the company, that's the lowest number of mortgages over the span of a quarter since late 2000. It's also down 19% from the end of last year, making it the eighth consecutive quarterly decrease.

This latest drop in activity continues a trend that has carved away 70% of the home mortgage business from its peak in the first quarter of 2021, said Rob Barber, CEO at ATTOM. He added that the most recent winter months were expected to be the slowest of the downturn.

"Things remain uncertain in the near future, with the potential for interest rates and inflation to go either way, but the spring buying season will be a key indicator of whether things may turn around," Barber said.

Along with purchase and refinancing loans, home equity lines of credit were also down significantly, according to the report. HELOCs totaled 245,071 in the first quarter, down 23.1% compared to the end of 2022. It was the second consecutive quarterly drop after a year and a half of gains

"Home-equity borrowing had been the only thing even partly propping up the home-loan business in the past year as owners were taking advantage of rising equity to draw cash out of their properties for home improvements or other expenses or investments," Barber said. "Now, that also is clearly taking a hit."

This dramatic slowdown in the lending market appears to be having a big impact. National Mortgage News reports thousands of layoffs have taken place across the industry in 2022 and 2023.

The latest data from the U.S. Bureau of Labor Statistics shows the U.S. had 345,550 loan officers (including those who offered other consumer products like auto loans) in May 2022 — soon after mortgage interest rates topped 5% following two years of record-low rates. That was down nearly 10,000 compared to May 2021.

Not surprisingly, the percentage of refinance loans fell the furthest. Only 407,956 mortgages were rolled over into new ones in the first quarter — the smallest amount this century. That was down 18% quarterly, 73% annually and 85% from the first quarter of 2021.

Overall lending activity dropped between the fourth quarter of 2022 and early 2023 in nearly all of the 173 metro areas studied. The biggest declines were in the Eastern U.S. metros of Buffalo, New York (total lending down 47.6%); Albany, New York (down 46.4%); and Toledo, Ohio (down 43.5%).

The few areas that saw lending activity increase were in the Southeast. The metros with the biggest quarter-over-quarter jumps were in Florida: Fort Myers (up 27.8%), Lakeland (up 21%) and Sarasota (up 6.6%).

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