After a slow start, low rates, Gen Z could sustain mortgage activity

Register now

Mortgage activity has been uneven this year, but it should continue to pick up from here, according to TransUnion.

About 1.4 million mortgage loans were originated in the first quarter, the lowest volume has been over any first quarter in the past four years. Affordability remains a top hurdle for homebuyers and is largely tied to the 8.2% annual decline in originations during the first quarter.

But lenders can expect to see these numbers rise following the second quarter's drop in mortgage rates. This broadens the pool of consumers who would benefit for a refi and also incentivizes consumers to make a purchase.

"The housing market can have high barriers to entry for first-time homebuyers, as low inventory and rising home prices continue to make affordability an issue. However, with interest rates dropping in Q2, we expect originations to grow through the end of the year, largely driven by refinance volume," Matt Komos, vice president of research and consulting at TransUnion, said in a press release.

Generation Z is also starting to creep into the market, accounting for 2% of mortgages originated in the first quarter. The share will expectedly grow as the cohort ages — the median homebuyer is 28, and the oldest Gen Zers are currently 24.

Overall, about 14 million, or 44%, of Gen-Z consumers were carrying some sort of debt in the second quarter, up from 11 million a year ago. Another 13 million should become credit eligible over the next three years, according to TransUnion.

Of all credit products, Gen Zers are least likely to have a mortgage right now, with only 0.5% of mortgages being held by members of the generation. A credit card is the product most consumed by Gen Zers, with 55% of them carrying a balance; this however only translates to 5% of the population with credit card debt, according to TransUnion.

For reprint and licensing requests for this article, click here.