Big bank mortgage originations continued rising in Q3 thanks to low interest rates

Continuing a trend that stretches back through most of this year, mortgage originations were up at some of the nation’s biggest banks in the third quarter due to this year’s consistently low mortgage rates.

As seen in the most recent data from Freddie Mac, mortgage interest rates have been sitting at approximately one full percentage lower throughout this year than they were last year.

The lower rates have led to an increase in overall originations, as the latest projections show that 2019 will likely best year for mortgage originations since 2016.

Evidence of that began to emerge earlier this year when mortgage originations rose at Wells FargoJPMorgan Chase, and Citigroup in the second quarter.

And that trend
continued in the third quarter.

Each of those banks
reported their third quarter earnings on Thursday, and examinations of each
bank’s earnings materials show that originations were up at each bank due to
low mortgage rates.

Wells Fargo, for
example, originated $58 billion in mortgages in the third quarter. That’s up
from the $53 billion originated in the second quarter, and from the $46 billion
originated during last year’s third quarter.

In fact, the third
quarter of 2019 saw Wells Fargo’s highest dollar amount in originations of any
quarter in the last year.

Unsurprisingly given
the interest rate environment, the increase in originations came as the share
of refinances went up as well.

According to Wells
Fargo, 40% of its mortgage originations in the third quarter were refinances,
the highest that share has been in at least a year.

In the second
quarter, for example, Wells Fargo saw 68% purchase originations, compared to
32% refinances, but in the third quarter, it was a 60/40 split between
purchases and refinances.

The share of
refinances has climbed steadily over the last year. During the third quarter of
2018, only 19% of Wells Fargo’s originations were refinances. That figured
climbed to 22% in the fourth quarter of 2018, 30% in the first quarter of this
year, 32% in the second quarter, and finally, to 40% in the third quarter.

As one might expect,
that increase was mirrored by the mortgage applications Wells Fargo received.
According to the bank, it received $85 billion in mortgage applications in the
third quarter, which was actually down slightly from the second quarter when
the bank got $90 billion in applications.

But, of those $85
billion in mortgage applications in the third quarter, a full 50% were for
refinances. That’s nearly double what it was in the same time period last year.

Wells Fargo is also
showing strong continuing demand for mortgages, as the bank reported that it
has $44 billion in its application pipeline (applications that are in process).

That’s the same
amount that it was in the second quarter, but up from $32 billion in the first
quarter and $22 billion in the third quarter of last year.

Mortgage
originations were also up at JPMorgan Chase.

According to the bank,
it originated $32.4 billion in mortgages in the third quarter, up from $24.5
billion in the second quarter, $15 billion in the first quarter, $17.2 billion
in the fourth quarter of 2018, and $22.5 billion in the third quarter of last
year.

Citi has the
smallest mortgage business of the three, but its originations are on the rise
as well.

That continues a recent trend at the bank, which scaled back its lending operations a few years ago, but began to ramp those back up last year.

According to the
bank, it originated $5 billion in mortgages in the third quarter, up 28% over
the second quarter total of $3.9 billion and up 85% over the third quarter of
last year, when the bank originated $2.7 billion in mortgages.

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