Overall rate locks were up 1.3% in August compared with July, driven by a 7.6% increase in cash-out refinance activity, according to Black Knight’s Originations Market Monitor.
The increase put cash-out refinance lending up more than 41% during the last three months.
What’s more, cash-out refinancing was up 30% compared with August 2020.
The increase in cash-out activity was enough to push the overall refinance share of the market mix back above 50% for the first time since February, even with rate/term lending remaining essentially flat (-0.5%).
Locks on purchase loans stayed roughly flat as well, ticking down 0.8% from July as rising home prices and constrained for-sale inventory continue to put downward pressure on purchase lending volumes.
Scott Happ. president, secondary marketing technologies, for Black Knight says the recent drop in mortgage interest rates – which recently fell back below an average of 3% and have been hovering around 3% for months now – “seems to have been enough to spur some high-credit-score and high-balance borrowers to refinance, as average credit scores rose along with the non-conforming share of the market.”
“The rise in cash-out lending is hardly surprising given the extraordinary growth we’ve seen in tappable equity this year,” Happ says in the report. “We’ve now seen cash-out activity increase for three consecutive months, and with $173,000 in equity available to the average homeowner with a mortgage and home prices still climbing, there is still room in the market for growth. With equity levels at record highs and interest rates broadly expected to tick upward in coming years, cash-out lending is likely to play a much larger part in the overall refinance market.”