Subprime and near prime mortgage originations, viewed one quarter in arrears, experienced the largest year-over-year growth from Q2 2015 to Q2 2016.
- Subprime originations reached nearly 64,000 in Q2 2016, the highest level since Q4 2009 and a 10.9% growth rate year over year.
- Near prime originations grew 5.7% to more than 262,000 in Q2 2016, the highest level since the Recession.
These new milestones in subprime and near prime account originations reflect growing credit access across the risk spectrum.
While access has grown, it’s important to note that the subprime share of originations was only 3.2%, and the near prime share was 13.2% of all originations. We don’t see a cause for concern.
Additionally, the mortgage borrower delinquency rate reached its lowest level since the Recession—it declined 8.4% from 2.50% in Q3 2015 to 2.29% in Q3 2016.
Total mortgage balances grew 1.7%, from $8.25 billion in the third quarter of 2015 to $8.39 billion in Q3 2016. This increase was primarily driven by continued low interest rate availability supporting origination growth, and higher home values leading to higher average new loan amounts.
Trends in the Mortgage Market
|Mortgage Lending Metric||Q3 2016||Q3 2015||Q3 2014||Q3 2013|
|Delinquency Rate (60+ DPD) Per Borrower||2.29%||2.50%||3.51%||4.46%|
|Average Debt Per Borrower||$193,489||$189,428||$186,577||$185,809|
|Prior Quarter Originations*||1.99 million||1.87 million||1.52 million||2.23 million|
*Note: Originations are viewed one quarter in arrears to account for reporting lag.
In fact, average new mortgage balance growth has been steady and alighted with rising home values.
Average new mortgage loan and home values
We’ve seen underwriting relax somewhat as the recovery has progressed. In Q2 2016, 36% of new loans are in prime and near prime, compared to 32% in Q2 2013.
Mortgage originations by risk tier