Rising interest rates are already creating ripples in the housing market as rate lock volume fell throughout the month of September according to Black Knight’s latest originations report.
“According to our OBMMI daily interest rate tracker, interest rates rose throughout much of September, with the average conforming 30-year offering climbing 16 basis points to hit 3.2% by month’s end,” said Black Knight Secondary Marketing Technologies President Scott Happ. “Climbing rates drove down rate lock volumes across the board in September, but the largest decline was seen—once again—in locks on rate/term refinance loans. That said, we did see pull-through rates trend higher on both purchase and refi loans, with refi pull-through seeing a sizeable uptick, likely also a result of that same rising rate environment.”
This month's data showed that rate locks overall were down 9.7% from August, primarily driven by an 18.7% drop in rate/term origination activity. September’s decline put rate/term refinance lending down 57.2% year-over-year while locks on both cash-out refinance and purchase loans fell 6%, though cash-out refinance are still up 21% over the last three months.
The average credit score of new borrowers also remained static standing at 731.
“We’ve noted the ‘psychological threshold’ of sub-3% rates in the past, with movement below that line triggering increased lending activity,” Happ continued. “What we’re seeing now represents the other side of that coin in a certain sense. It remains to be seen how much higher rates will climb—and how quickly—and in turn, how borrowers will react. It will also be important to see how and to what degree historic equity stakes and modest increases to for-sale inventory will impact cash-out and purchase lending in the coming months.”
Black Knight's full originations report is available on BlackKnightinc.com.