Optimal Blue: Higher Rates Weighing on Purchase, Refinance Demand

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Optimal Blue, Plano, Texas, found refinance share fell to 19% of total lock volume in May, the lowest level in nearly a year.

Rate-and-term refinances were down 34% month-over-month, but were up 46% year-over-year. Cash-out refinance volume fell 13% month-over-month, but was up 7% year-over-year.  

Purchase lock volume was down 5% from April, but up 3% year-over-year.

Overall, lock volume was down 9% month-over-month but up 7% year-over-year.

“Purchase activity continues to be the loan purpose leader in spite of affordability pressures,” said Mike Vough, senior vice president of corporate strategy at Optimal Blue. “More than four out of five mortgage locks were tied to purchase transactions in May, but the more notable shift may be what happened after borrowers locked. Pull-through rates declined across both purchase and refinance pipelines, which tells us borrowers are closely monitoring changes in the rate market.”

Purchase pull-through fell 539 basis points month-over-month to 76.7%–also 636 basis points year-over-year. Refinance pull-through fell 1,332 basis points month-over-month to 65.3%, but stayed 304 basis points higher year-over-year.

Conforming share was just under 49% of total lock volume in May. FHA share was 19%, non-conforming share was also 19%, VA declined to 13% and USDA was flat at 1%.

Adjustable-rate mortgages were 11% of total production in the month. Single-family homes were 64% of production.

First-time buyers were just 44% of conforming purchase locks, 70% of FHA purchase locks and 44% of VA purchase locks, marking declines across all three products.

Debt-to-income ratios showed little change, with conforming at 36.4%, FHA at 43.6% and VA at 42.8%, and the average purchase credit score held at 731. Conforming borrowers averaged 754, FHA borrowers were at 677 and VA borrowers were at 715.

The average locked loan amount increased to $395,536 from $394,046 in April and average loan-to-value was 81.6%.