Black Knight Inc. has released its latest Originations Market Monitor report, looking at mortgage origination data through May month-end with daily rate lock data from Black Knight’s Optimal Blue PPE.
“At the start of May, it seemed mortgage interest rates would continue their upward climb and, indeed, rates did rise above 5.5 percent before pulling back some 20 basis points,” says Scott Happ, president of Optimal Blue, a division of Black Knight. “Ultimately, our OBMMI daily interest rate tracker showed 30-year conforming offerings finishing the month at 5.34 percent, down 7 basis points from last month. Still, despite this plateau in rates, rate lock volume continued to slide in May, with declines seen across all loan purposes.”
The month’s pipeline data showed overall rate locks down 4.8% month-over-month, with rate/term refinance lending activity down another 23.6% from April to mark an 89.9% year-over-year decline. Cash-out refinance locks also fell (-11.9%) and are now down 42.2% since last year. The combined decline in refinance locks pushed the refi share of the market down to just 18%, the lowest point on record since at least January 2018, when Optimal Blue began tracking the metric. Purchase lock volumes were down 2.3% from April and were flat year-over-year.
However, when looking at lock counts to exclude the impact of home price appreciation on volumes, purchase locks were down 8.5% year-over-year in May. Government loan products gained market share as FHA and VA lock activity increased at the expense of agency volumes, a trend also likely reflected in the decline seen in the average loan amount from $362,000 to $359,000. Average credit scores also fell in May, led by another steep drop in cash-out refinance scores, which are now below 700 on average, down 20 points in the last three months and 33 points year-over-year.
“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,” Happ continues. “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 percent 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.”
