Rising mortgage rates are shifting lenders’ focus to homebuyers

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Mortgage lenders are again focusing on homebuyers to stimulate business amid a slowdown in refinancing.

According to Inside Mortgage Finance, an industry research group, purchase mortgages made up nearly half of the loans that were wrapped in government-backed securities and sold to investors in the third quarter. This is the highest percentage since before the pandemic, which depressed interest rates and triggered a record wave of refinancing.

“Last year and the first half of this year we were in full swing with refis and the phones kept ringing,” said Michael Menatian, owner of Sanborn Mortgage Corp. in West Hartford, Connecticut. “

A still hot housing market means many buyers will need financing to close new homes. But interest rates have risen lately, reducing the number of people who could cut their rates or cut their mortgages by refinancing.

Freddie Mac said the average 30-year fixed-rate mortgage rate rose to 3.05% last week, its highest level since April, albeit still low by historical standards.

The shift means home buyers will be better able to negotiate a lower interest rate, said Sam Polland, loan officer at Intercoastal Mortgage LLC in Potomac, Maryland.

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Lenders pooled hundreds of billions of dollars in refinancing loans last quarter. But it’s harder to do business these days, said Mr. Menatian. Instead of answering incoming calls, he makes calls to customers whose home value has risen to the point where they can get refinancing from their mortgage insurance.

Rising interest rates could pose challenges for lenders whose growth depended heavily on refinancing during the pandemic mortgage boom. At the same time, lenders who are more focused on the buying market have been thriving lately.

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US Bancorp,

According to Inside Mortgage Finance, about half of its mortgages were given to buyers in the first six months of this year. The third quarter generated more than $ 28 billion, the highest amount in years and an 11% year-over-year increase.

The bank should continue to benefit from strong home sales as it focuses more on buying mortgages, CFO Terry Dolan said in a phone call with analysts Thursday.

Rocket Cos., The country’s largest mortgage lender, extended 10% of all refis in the first half of the year. Refis accounted for 88% of the company’s mortgage business during that period.

The company aims to become the largest retail purchase lender by the end of 2023, CEO Jay Farner said in August. The stock is down 18% this year.

Write to Ben Eisen at [email protected]

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