Mortgage Market Softens Even as Delinquencies Decline | Topouzis & Associates, P.C.


May 30, 2019

Mortgage Market Softens Even as Delinquencies Decline

Mortgage Market Softens Even as Delinquencies Decline

While there has been a rise in the amount of consumer borrowing overall (rising to record-breaking levels), and while use of financial technology (FinTech) has increased overall (driving these record rises), home mortgages on the other hand have undergone something of a cooling-off of late. This according to a February Industry Insights Report released by TransUnion covering the fourth financial quarter of 2018.

Personal loans drove this rise in consumer borrowing, facilitated by FinTechs, which went up by $21 billion, reaching its new record high of $138 billion at the close of 2018. People are using personal loans in a myriad of ways—as a means to consolidate credit debt, to finance home improvement projects, to pay for high-price purchases made online and in brick-and-mortars. As a result, lenders and banks have begun diversifying their offerings to appeal to—and be available to—borrowers at various levels of risk.

Meanwhile, however, home mortgages have softened. Among the top twenty metropolitan statistical areas (MSAs), those where the average new account balance exceeded $300,000 went through a 10 percent decline in originations year-over-year. While those MSAs with average new account balances below $300,000 saw an increase in originations of two percent year-over-year, this was not enough to offset the shortfall in the higher-tier. The average new mortgage account balance dropped year-over-year from $228,563 in Q4 of 2017 to $227,376 in Q4 2018.

It’s a positive trend that the MSAs where the average mortgage balance was lower than $300,000 were actually stronger in late 2018 than in late 2017. And it is worth noting that there was an increase in the number of loans to subprime borrowers overall—though these still come in at less than four percent of all mortgage originations. Meanwhile, serious mortgage delinquencies continue to decline—coming in at 1.66 percent, which is down from 1.86 percent in Q4 of 2017. That, too, can be considered nothing if not good news.

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