Rate Lock Volumes Take a Hit

According to Black Knight’s Optimal Blue Mortgage Market Indices, mortgage rates in April began the month at 6.25% and ended at 6.45% for a monthly average of 6.38%, a full 17 points basis points lower than seen in March. 

However, rate lock volume fell 22% month-over-month, with half the change attributable to March having three additional business days; adjusted for these calendar effects, April volumes dropped just 10%. 

Further, month-over-month changes were similar across all loan purchases, as purchase locks fell 21.8%, cash-out refinances fell 20.6%, and rate/term refis fell 27.6%. Also, the refi share of lock volume dipped below 13% to 12.8%, setting a new low point for refi production. 

“Despite the fact that mortgage rates on average were lower in April, rate lock volumes took a hit,” said Andy Walden, VP of Enterprise Research and Strategy at Black Knight. “From March to April, volumes were down 22%, even though the average rate in April was 17 basis points lower than that of March. While half the decline can be explained by the fact that there were three fewer business days in April than in March, we clearly saw additional cooling in rate lock volumes this month.” 

The average mortgage amount remained flat from March, which now stands at $355,000, while the average purchase price rose slightly from $455,000 to $447,000. Credit quality also increased by two points in April, while adjustable-rate mortgages dropped to 7.8% of all lock volume, down from 8.8% in March. 

“After seeing purchase rate locks pull to within 15% of pre-pandemic levels in mid-January and again in mid-March on easing rates, we’ve seen that deficit eclipsed 30% again in recent weeks,” Walden continued. “The cause is likely multifaceted. In addition to fewer business days in April than in March, another component may be potential homebuyers waiting on the sidelines for more favorable rates before locking.” 

“We saw a similar phenomenon on the rate dips in March. Inventory challenges are surely playing a role as well,” Walden continued. “New listing volumes remain well below pre-pandemic levels and active for-sale inventory fell for the sixth consecutive month on a seasonally adjusted basis. Lock volumes will be worth watching closely in coming weeks to see if this trend continues.” 

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