What key function does the primary mortgage market serve?

The primary mortgage market is essential because it is the sector of the financial system where new mortgages are created and issued. This market involves lenders providing funds directly to borrowers, enabling them to purchase homes or refinance existing loans. By issuing new mortgages, the primary mortgage market facilitates homeownership and drives economic activity, as it provides the necessary financing for homebuyers to secure property.

In contrast, while refinancing existing mortgages is an important activity, it typically occurs in the secondary market where existing loans may be bought or sold. The trading of mortgage-backed securities also relates more to the secondary market, which deals with the investment side of previously issued mortgages. Assessing property values, while crucial for determining loan amounts and interest rates, is a service that accompanies the mortgage process but does not define the primary function of creating mortgages. Thus, issuing new mortgages is the primary focus of this market.