Non-conforming and FHA loan products gained market share in August, while all other products lost ground, according to Black Knight’s latest Originations Market Monitor report.
Rate lock volumes fell across the board in September, as interest rates rose throughout much of the month, the report shows.
As of the end of September, the average rate for a 30-year fixed-rate mortgage was 3.2%, which was 16 basis points higher compared with the start of the month.
The report uses daily rate lock data from Black Knight’s Optimal Blue pricing engine.
“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,” says Scott Happ, president of secondary marketing technologies for aid Black Knight. “That said, we did see pull-through rates trend higher on both purchase and refi loans, with refi pull-through seeing a sizable uptick, likely also a result of that same rising rate environment.”
The month’s pipeline data showed that overall rate locks were down 9.7% from August, driven by an 18.7% drop in rate/term origination activity.
The month’s decline puts rate/term refinance lending down 57.2% year-over-year and drove the overall refinance share of the market mix back down below 50%.
Locks on both cash-out refinance and purchase loans fell 6% in September, though the former are still up 21% over the last three months.
Overall average credit scores remained static in September, though declines in scores on both cash-out and rate/term refinance loans could indicate higher credit borrowers starting to exit the market as rates rise.
“We’ve noted the ‘psychological threshold’ of sub-3% rates in the past, with movement below that line triggering increased lending activity,” Happ says. “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,” he adds. “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.”
Photo: Tierra Mallorca