Last year was a record year for Americans taking out mortgages. And as The Wall Street Journal reported Tuesday (June 22), most of those mortgages came from non-bank lenders.
These lenders issued 68 percent of all mortgages in the U.S. in 2020, up from 58.9 percent in 2019, the highest recorded market share, and the largest yearly gain in six years.
Mortgage lenders that do not take deposits or offer other banking services have been growing over the last decade, per the news outlet. Non-bank lenders have accounted for over 50 percent of the market since 2016, and by the end of 2020, seven of the 10 largest U.S. mortgage lenders were nonbank firms.
COVID-19 saw the start of an era of “cheap money,” the Journal said, which helped fuel the growth of these lenders. Meanwhile, average rates for 30-year mortgages dropped below 3 percent for the first time on record, leading to a boom in home sales and refinancing, to the tune of $3.78 trillion in home loans.
Banks did not take part in this boom, avoiding all but the safest borrowers with visions of the 2008-2009 crash still fresh in their mind. Firms like Quicken Loans stepped in, with the nation’s largest mortgage lender seeing its loan volume more than double last year.
As PYMNTS reported earlier this year, the pandemic also changed the way customers looked at the mortgage process.
The crisis accelerated the industry’s need to catch up with consumer use of digital tools. Many shoppers seeking loans don’t just prefer to conduct the process virtually: they expect it from lenders, including those providing mortgages and home loans.
“Digital natives count on technology to gather information on their own terms, act as the primary method for communication and play a huge role in the overall process,” said Tim Elkins of PrimeLender. “Most of today’s consumers expect the instant digital conveniences they have grown accustomed to from major eTailers and service providers, regardless of their generation.”