Rate Locks Fall Across All Loan Types

Black Knight, Jacksonville, Fla., said despite a leveling off in interest rates, lock volumes fell another 4.8% from April, with monthly declines seen across both rate/term (-23.6%) and cash-out (-11.9%) refinances.

The Black Knight Optimal Blue Mortgage Market Indices said while purchase volumes fell 2.3% from April and were flat year-over-year, lock counts show purchases down 8.5% from last May. While struggling under high home prices, lack of inventory and a higher rate environment, purchases now make up the largest share of rate locks (82%) since Optimal Blue began tracking the data in 2018.

The report said government-backed FHA and VA locks captured additional market share from conforming products, a trend also likely reflected in the decline seen in the average loan amount

Meanwhile, borrower credit scores fell in May, led by another steep drop in cash-out refinance credit scores, which are now below 700 on average, down 20 points in the last three months and 33 points year-over-year.

“Despite this plateau in rates, rate lock volume continued to slide in May, with declines seen across all loan purposes,” said Scott Happ, president of Optimal Blue. “The month’s data shows a market struggling under the weight of significantly higher rates than Americans have enjoyed for the better part of the last three years. We’ve seen rate/term refinance activity essentially evaporate and cash-out activity is now suffering as well. While there is volume pressure across the board due to rising rates, purchase volumes are holding up the best and are now driving 82% of all origination activity. Lenders are now more reliant on the purchase market for origination volumes than they have been in 20 years. Meanwhile, the trifecta of low inventory, high prices and climbing rates that has created the least affordable housing market in 16 years continues to create headwinds for precisely that segment.”