The mortgage market experienced a historic boom in 2020, with record origination volumes and lender profits. While many borrowers benefited from record-low mortgage rates, the pass-through of lower rates to households was limited by a sustained increase in the markups charged by lenders. This paper studies the evolution of the mortgage market during the COVID-19 pandemic and evaluates the extent to which the events of the pandemic led to a contraction in mortgage credit supply. The analysis combines financial market data on prices and yields for mortgage-backed securities, time-series data on mortgage interest rates, microdata on mortgage rate offers and interest rate locks from the Optimal Blue platform, and several other data sets.
Andreas Fuster, Aurel Hizmo, Lauren Lambie-Hanson, James Vickery, and Paul Willen
Federal Reserve Bank of Boston