The mortgage industry continues to feel the effects of the Brexit vote from late June, as refinancing activity experienced a surge from July to August, according to Black Knight Financial Services’ First Look at Mortgage Data for August 2016.
Prepayment speeds, which are usually a good indicator of refinance activity, caught up with the surge in applications reported after mortgage rates dropped off following the Brexit vote, according to Black Knight. The prepayment rate, also known as the single month mortality rate (the percentage of mortgage principal prepaid during a given month) experienced a 32 percent increase from July to August and a 53 percent jump from August 2015 to August 2016.
In fact, August’s prepayment rate of 1.67 percent was the highest it has been in more than three years, according to Black Knight.
“The increase in prepayments clearly seems to be driven by the post-Brexit wave in mortgage applications, particularly refinances,” Black Knight Data & Analytics Executive Vice President Ben Graboske said. “What we’re seeing here is the effect of standard 30-plus-day underwriting timelines pushing closings on those post-Brexit applications—many of which were initiated around the end of June and early July—into August. We may see Brexit continue to affect prepayment speeds into September.”
Mortgage loans were performing better in August than in the previous month, as the national delinquency rate (percentage of properties 30 or more days overdue but not in foreclosure) declined by approximately 6 percent—reversing the calendar-driven spike that occurred in July—since July ended on a Sunday and payments are not processed until the following Monday or Tuesday, payments made on the last day of the month count toward the next month. According to Black Knight, it is typical to see partial, but not always a full, recovery the following month. The national delinquency rate was at 4.24 percent for August, which calculated to approximately 2.15 million properties. In addition to the monthly decline, August’s delinquency rate also represented an over-the-year decline of 11 percent.
Click here to view the entire First Look for August 2016.