Construction workers build new homes in Philadelphia, Tuesday, April 5, 2022. Low mortgage rates have helped juice the housing market over the past decade, easing the way for borrowers to finance ever-higher home prices. A run-up in rates in recent weeks is threatening to undo that dynamic, setting the stage for a slowdown in home sales this year as the increased borrowing costs reduce would-be buyers’ purchasing power. Credit: Matt Rourke

Mortgage loan applications plummeted in the first three months of this year as rising interest rates dampened refinancing and original loan activity.

Loan originations, which include all the steps from application to approval or denial of a loan, were down for the fourth straight quarter, according to real estate data firm ATTOM Data Solutions.

The 2.71 million residential mortgage originations in the first quarter fell 18 percent from the fourth quarter of 2021, the largest quarterly decrease since 2017. They plummeted 32 percent from a year ago.

The subdued activity is already showing in Maine. Camden National Bank, one of the largest banks in the state, said it is expecting a decline in mortgage volume this year because of limited refinancing activity.

The 30-year fixed mortgage is 5.4 percent, up dramatically from the less than 3 percent rates for much of the past two years.

Through May, Camden National’s mortgage volume was down about 20 percent year over year, Renee Smyth, executive vice president at Camden National, said.

“Customers are holding onto their low rates on mortgages they obtained in the last two years, and many are now using home equity loans or lines of credit for their borrowing needs,” she said.

Home-equity lending rose 6 percent in the first quarter of this year compared with the fourth quarter of 2021, and was up 28 percent annually, ATTOM said. 

Nationally, refinancing loans for the week that ended June 3 were down 75 percent compared to one year ago, according to the Mortgage Bankers Association.

That drop-off in refinancing activity is no surprise given the rapid rise of mortgage rates, Rick Sharga, executive vice president of ATTOM, said. But loans for new purchases were expected to remain strong in 2022.

“The weakness in purchase loan activity shows just how much of an impact the combination of escalating home prices and rising interest rates have had on borrower activity this year,” he said.

The higher interest rates also are causing layoffs at some lenders, particularly at non-bank lenders. Several hundred people have been laid off since May, according to thetruthaboutmortgage.com, a website that tracks mortgage layoffs, closures and corporate mergers.