The sluggish housing market could receive a nice jolt as mortgage rates continue to fall and lenders are originating loans at record levels.
Lenders issued the most mortgages in 14 years last quarter, providing $700 billion of home loans to borrowers between July-to-September, according to Inside Mortgage Finance, the Wall Street Journal reported.
Lower interest rates have led homeowners to replace their higher-rate mortgages for lower rate ones. Yet, home sales still declined 2 percent in September from August, according to data from the National Association of Realtors.
Economists say, however, that it can take a few months for lower mortgage rates to translate into new home purchases because people need time to look for a new home, the Journal reported.
Falling mortgage rates have also led to a jump in refinancings. Refinancing activity increased 75 percent from a year earlier in July and August.
Many of these home mortgages were originated by nonbank lenders such as Quicken Loans and loanDepot rather than traditional banks. Some economists and academics have warned about the potential risks poised by nonbanks during an economic downturn since they are subject to less regulation than banks and are not required to keep the same capital levels as conventional banks. [WSJ] — Keith Larsen