How Resilient Is Mortgage Credit Supply? Evidence from the COVID-19 Pandemic
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.