Optimal Blue: Mortgage Lock Volume Rose in January on Lower Rates

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Mortgage lock volume increased 36% in January compared with December, in response to lower mortgage rates, according to the Optimal Blue Originations Market Monitor.

“The new year kicked off with continued rate relief and a 36 percent month-over-month gain in total lock volume, driven by a seasonal 38 percent increase in purchase lock volume,” says Brennan O’Connell, director of data solutions, Optimal Blue, in the report. “We also saw the smallest year-over-year decline in purchase lock counts since May 2022, which may foreshadow a stabilizing market and friendlier lending environment in 2024.”

In addition to the month-over-month climb in purchase lock volume, cash-out and rate/term refinance volumes increased 30% and 20%, respectively. 

The Optimal Blue Mortgage Market Indices (OBMMI) 30-year conforming rate dropped 4 basis points (bps) in January to finish the month at 6.53% after a mid-month peak at 6.7%.

FHA and VA rates also fell in January, dropping 4 bps and 3 bps, respectively, while jumbo rates moved in the other direction with an 11-bps increase since year-end.

Mortgage rates fell despite a month-over-month 15-bps increase in the 10-year Treasury yield in January, leading to a 19-bps narrowing of the mortgage-to-Treasury spread. At approximately 250 bps, the January spread reached levels unseen since mid-2022. While still elevated relative to historical averages, the spread has narrowed significantly since eclipsing 300 bps on multiple occasions in 2023.

Conforming products gained market share to start the year, rising 72 bpsto account for 57.3% of total volume.

Non-comforming products – including jumbo and non-QM – rose 27 bps to make up 9.7% of total volume.

Ginnie Mae-eligible products moved inversely, however, with the FHA share dropping 87 bps and the VA share falling 13 bps, each representing 20.7% and 11.7% of total volume, respectively.

The share of adjustable-rate mortgage (ARM) products stayed consistent at just above 5% of total volume. Improving rate conditions and an inverted yield curve have limited the demand for ARM loans.

The rise in lock volume coincided with a January climb in average credit scores across all products and loan purposes. The average loan amount also rose, increasing from $349,500 to $355,600.

Finally, after six consecutive months of decline, the average home purchase price rebounded, jumping from $435,900 to $444,900.

Photo: Georg Bommeli

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