Black Knight: Rate Lock Activity Falls as Interest Rates Climb

MBA NewsLink Staff

Black Knight, Jacksonville, Fla., said amid rising interest rates, rate-lock production fell by nearly 20 percent in March, led by a sharp drop—more than 50 percent—in rate/term refinance activity.

The company’s monthly Originations Market Monitor reported cash-out refinance locks fell 40% from last month as homeowners likely look for other avenues, such as HELOCs, 2nd liens, etc., to access tappable equity without sacrificing historically low first-lien mortgage rates. The combined decline in refinance locks pushed the refi share of the market down to just 20% in April, the lowest point on record since at least January 2018, when Black Knight division Optimal Blue began tracking the metric.

The report said while purchase locks fell 11% from March, they remained flat on a year-over-year basis, indicating consistent and resilient demand from homebuyers. Meanwhile, government-backed lending picked up in April as FHA and VA locks captured market share from conforming products. And credit scores were flat for purchases and ticked higher for rate/term refis; however, cash-out credit scores fell 8 points on average as higher-credit score borrowers move to the sidelines.

“To put [interest rates] in perspective, in the last few weeks, we’ve blown through the recent peak seen in 2018 and are now hovering at or near the highest interest rates we’ve seen since the Great Recession,” said Scott Happ, president of Optimal Blue.

“Seen in the light of such quick and sharp rises in 30-year rates, April’s declines in rate lock activity – though bracing – are hardly surprising,” Happ said. “That’s particularly true of refinance locks when half of all mortgage holders have current first lien rates below 3.5%. That being said, while purchase locks were down somewhat from March, they remained flat from last April, reflecting consistent and resilient demand from homebuyers.”