Low interest rates are continuing to drive mortgage volume and other associated products. The first quarter of 2016 compared to the same time last year saw a 10.3 percent increase in first mortgages, a 23.5 percent increase in home equity installments and a 10.2 percent increase in home equity lines of credit.
An increase in the overall volume of mortgages has not meant a change in the number of loans being issued to subprime borrowers. The percentage of prime vs. subprime loans has remained fairly consistent for the last three years.
Equifax Inc. (NYSE:EFX), a global information solutions provider today released its May 2016National Consumer Credit Trends Report, which shows among other findings, that total mortgage volume increased in Q1 2016, compared to opening quarters in previous years.
Total new accounts and year-over-year increases for the first quarter of 2016 include:
Home equity installment loans: 182,400, an increase of 23.5 percent and an eight-year high for an opening quarter;
First mortgages: 1.86 million, an increase of 10.3 percent; and
Home equity lines of credit (HELOC): 314,400, an increase of 10.2 percent.
Similarly, the latest data shows that lending to borrowers with subprime credit scores (consumers with an Equifax Risk Score™ of 620 or below) – as a share of total lending – has remained consistent for the third consecutive year. New first mortgage accounts to subprime borrowers during Q1 of 2015-2016 have increased on a consistent basis alongside that of prime lending, with approximately 95 percent accounting for prime loans and 5 percent accounting for subprime loans.
"The first quarter of 2016 was a strong one for mortgage lending and underwriting practices appear to have maintained their rigor over the last three years." said Amy Crews Cutts, chief economist for Equifax. "We anticipate that the second quarter of 2016 will maintain this trend. And later this year, the much-anticipated addition of trended credit data to the mortgage underwriting process will help to strengthen the marketplace further by helping to statistically separate lower risk borrowers from those presenting higher risk."
Additional data from the May 2016 Equifax National Consumer Credit Trends Report includes:
The total dollar amount of first mortgage originations in Q1 2016 is $450.5 billion, a year-over-year increase of 12.3 percent, realizing the highest amount for a first quarter total since 2013;
The total balance of new mortgages originated for borrowers with subprime credit scores in that same time was $16.2 billion, a year-over-year increase of 38.7 percent;
Home Equity Installment Loans
The total balance of new loans originated for borrowers with subprime credit scores in Q1 2016 was $454.9 million, an increase of 28 percent;
In that same time, the total origination balance on all loans was $5.87 billion, an increase of 14.1 percent;
The average loan amount on new subprime home equity installment loans increased 9.6 percent from Q1 2015-2016, while in that same time the average loan amount on all home equity instalment loans increased 1.7 percent.
Home Equity Lines of Credit (HELOC)
The total credit limits of new loans originated in Q1 2016 was $35.2 billion, a year-over-year increase of 14 percent and an eight-year high;
Total originations and credit limits represent an eight-year high for an opening quarter.;
The total credit limits on new subprime loans in Q1 2016 was $169.6 million, an increase of 10.7 percent over Q1 2015.
Equifax's National Consumer Credit Trends Report reveals population-level debt and lending insights, including originations, balances, number of loans, delinquencies and more from more than 220 million consumers.
About Equifax Equifax powers the financial future of individuals and organizations around the world. Using the combined strength of unique trusted data, technology and innovative analytics, Equifax has grown from a consumer credit company into a leading provider of insights and knowledge that helps its customers make informed decisions. The company organizes, assimilates and analyzes data on more than 800 million consumers and more than 88 million businesses worldwide, and its databases include employee data contributed from more than 5,000 employers.
Headquartered in Atlanta, Ga., Equifax operates or has investments in 24 countries in North America, Central and South America, Europe and the Asia Pacific region. It is a member of Standard & Poor's (S&P) 500® Index, and its common stock is traded on the New York Stock Exchange (NYSE) under the symbol EFX. Equifax employs approximately 9,200 employees worldwide.
Some noteworthy achievements for the company include: Ranked 13 on the American Banker FinTech Forward list (2015); named a Top Technology Provider on the FinTech 100 list (2004-2015); named an InformationWeek Elite 100 Winner (2014-2015); named a Top Workplace by Atlanta Journal Constitution (2013-2015); named one of Fortune's World's Most Admired Companies (2011-2015); named one of Forbes' World's 100 Most Innovative Companies (2015). For more information, visit www.equifax.com