Total mortgage rate lock volume decreased 5.87% in May compared with April, as mortgage rates remained stubbornly high, according to Optimal Blue’s Market Advantage report.
Refinance share decreased to 16% – down from from 21% in April – as rising rates further eroded borrower incentive.
Rate-and-term refinances were down 44.4% while cash-out refis fell 10%, Optimal Blue says.
Purchase activity was flat in May compared with April: Purchase lock counts – which control for home price appreciation – were down 10% year-over-year.
The drop in purchase lock volume comes just as the May home buying season is normally heating up.
“Rising mortgage rates are squeezing borrower affordability, while tighter spreads are putting pressure on lenders in the secondary market,” says Brennan O’Connell, director of data solutions at Optimal Blue. “With the brief window of affordability relief now closed, the new data shows first-time buyers are feeling the strain, with modest declines in their share of conforming and FHA loan locks.”
Optimal Blue has added nine new data metrics to its Market Advantage mortgage data report for deeper view into drivers of lending profitability, including DTI, loan sale execution and borrower profiles.
“The Market Advantage has long been a trusted source for early mortgage market insights, and we’ve used Optimal Blue’s position as the leader in capital markets technology to take the report to the next level,” says Mike Vough, head of corporate strategy at Optimal Blue. “These new metrics provide deeper insight into the interconnectedness of front-end borrower affordability and back-end loan sale execution, allowing housing finance professionals and market observers alike to better understand how primary market activity and secondary market dynamics intersect to drive lending profitability.”
The average rate for as a 30-year conforming fixed-rate mortgage increased 16 basis points in May to 6.84%.
The 10-year Treasury yield increased 26 bps to 4.41%, narrowing the report’s treasury spread to 2.44%, a 10 bps month-over-month contraction.
Non-QM lending continued to edge up: Loans locked under expanded guidelines (i.e., non-QM) represented 7.36% of May’s volume, continuing a gradual upward trend as lenders and borrowers explore alternative qualification paths.
Photo: Georg Bommeli
