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Lock Volume Plummets Nationwide on Rising Rates

Black Knight, Inc. has announced the release of its latest Originations Market Monitor report, looking at mortgage origination data through August month-end. Leveraging daily rate lock data from the Black Knight Optimal Blue PPE – mortgage lending's most widely used pricing engine – the Originations Market Monitor provides the industry's earliest and most comprehensive view of origination activity.

Key Findings:

  • Black Knight's Optimal Blue Mortgage Market Indices tracked 30-year rates as they started the month at a recent low point and rose 50 basis points to finish the month at 5.8%
  • Total lock volumes were down nearly 9% from July, with declines in both rate/term (-13.9%) and cash-out (-8.9%) refinances; purchase loans, which accounted for 82% of all activity, were down 8.7%
  • Purchase lock counts, which exclude the impact of soaring home values on dollar volume, are off 30% from last year and 16.1% from 2019, hitting their lowest August levels in more than four years
  • July marks the second consecutive month that the number of purchase locks has fallen below pre-pandemic levels amid affordability headwinds
  • The average purchase price among homes being financed fell by almost $12K (-2.7%) in August and is now down by more than more than $43K (-9.2%) since March
  • The average loan amount dropped another $4K in August to $340K, the fifth consecutive drop, as home prices fell month over month for the first time in three years

"Mortgage originators continue to feel the effects of interest rate and affordability challenges," said Scott Happ, president of Optimal Blue, a division of Black Knight. "Facing headwinds of higher rates and a move into the traditionally slower purchasing months, rate lock volumes fell nearly 9% overall in August to their lowest level since December 2019. Purchase lock counts, which exclude the impact of soaring home values on volume, are off 30% from last year. That count is now down more than 16% from 2019, marking the second consecutive month the number of purchase locks have fallen below pre-pandemic levels, as well as the lowest August count in more than four years."

The month's pipeline data showed overall rate lock dollar volume down 8.9% month over month, led by a 13.9% decline in rate/term refinance locks, which are now down 94.5% since last year. Cash-out refinance activity fell another 8.9% from July – a 72.2% year-over-year decline. The refi share of the market held at 18%, the lowest share on record dating back to January 2018. Government loan products continued to gain market share as FHA lock activity increased at the expense of both conventional and non-conforming loan volumes, a trend also likely reflected in another decline in the average loan amount – from $344K to $340K. The overall average credit score in August held steady at 722.

"Interest rates rose again in August after retreating slightly in July," Happ explained. "This continues to have profound effects on home affordability, which returned to near 35-year lows to close out the month. As we reported last month, home prices have begun to pull back in some of the hotter home markets, particularly those on the West Coast. Likewise, we've observed declines in both the average purchase price and average amount financed in each of the past 5 months, with each now down 9% since March. We will keep a close eye on this trend as the market moves into the traditionally slower purchasing months ahead."

Each month's Originations Market Monitor provides high-level origination metrics for the U.S. and the top 20 metropolitan statistical areas by share of total origination volume. Much more detail on August's origination activity can be found in the full Black Knight Originations Market Monitor report.

To read the full report, including more charts and methodology, click here.

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport, with more than six years of writing experience. She has served as Editor-in-Chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington. She has covered events such as the Byron Nelson, Pac-12 Conferences, the Women in Dallas Film Festival, to freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, she is an avid jazz lover and reader. She can be reached at [email protected]
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