Optimal Blue: Lock Volume Increased 5 Percent in February, Driven by Surge in Purchase Activity

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Mortgage lock volume increased 5% in February compared with January due to an 8.3% increase in purchase activity during the month, according to Optimal Blue’s Originations Market Monitor report.

Locks for rate/term refinances fell by 22.5% while locks for cash-out refinances fell 3.1%, according to the secondary marketing software firm.

OptimalBlue says the purchase market is nearing its floor: Purchase lock counts, which control for changing home prices, rose 7%, a significant increase compared to the 2% increase in the same period last year, which came during a similar uptick in interest rates.

February saw mortgage rates increase, following three consecutive months of declines. The average rate for a 30-year conforming loan increased 36 bps to 6.89%, FHA rose 28 bps to 6.66%, VA rose 41 bps to 6.50%, and jumbo rose 37 bps to 7.35% by the end of the month, according to the firm’s data.

Non-conforming loan products, including jumbo and non-QM loans, claimed an additional 183 basis points of market share, ending the month with 11% of the total volume. Meanwhile, conforming loans maintained a steady 57%, with slight decreases in FHA and VA loans.

ARMs became slightly more popular in February: The rate increase nudged the share of ARM loans up, though they still account for only 6% of total production volume. The current economic scenario, particularly the inverted yield curve, will likely constrain further demand growth for these products.

Credit quality and loan amounts continued their upward trend: Credit quality improved across all loan products, except VA loans, which held steady. The average loan amount increased from $355,600 to $359,300, while the average home purchase price climbed from $444,900 to $454,100.

“As the spring buying season commenced, we saw a resurgence in purchase locks, despite the rise in interest rates,” says Brennan O’Connell, director of data solutions at Optimal Blue, in the report. “Although lock counts were down on a year-over-year basis, the rate of decline is decelerating and suggests we may be nearing a floor for purchase lending in the current rate environment.”

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