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As the mortgage market went haywire, rate locks fell by 11%

Rate locks declined for the third consecutive month in June

Just how bad was the mortgage market in June, when rates climbed north of 6%? Rate locks fell across all loan types last month, and were down 11% overall from May, according to Black Knight.

The company’s monthly mortgage originations report also revealed that 82% of locks in June were purchases, the lowest share of refis since the company began tracking data in 2018.

June’s data represents how interest rate-dependent the originations market has become, said Scott Happ, president of Optimal Blue, a division of Black Knight.

“With 30-year rates hovering below 6% – still historically low – we’ve seen the rate/term refi market dwindle to next to nothing, with increasing downward pressure on cash-out activity,” said Happ. “Eventually, equilibrium will return but as of June, the market seems to be having trouble adjusting to a rate environment anywhere above the historically low levels reached during the pandemic.”

Cash-out refinance volume fell 13% from May, while rate-term refis fell 9% and purchase loans fell 11%. Purchase rate lock volume is down nearly 16% from June 2021. But a closer look reveals even more troubling news on the purchase front.

“However, when we look at purchase lock counts to exclude the impact of soaring home values on volume, we see the number of purchase mortgages is off some 21% from last year’s levels,” Happ said.


Creating a path to success in today’s purchase market

Meeting the needs of a new generation of homebuyers while managing the ebbs and flows of a volatile housing market is a major endeavor for any mortgage lender. So, what should lenders be doing to thrive in the face of a post-pandemic housing market rife with new hurdles?

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Mortgage rates, as measured by Black Knight’s Optimal Blue OBMMI pricing engine, jumped past 6% in mid-June before pulling back to finish the month at 5.79%, a jump of 44 basis points from May. 

Government loan products gained market share as the Federal Housing Administration (FHA) and Veterans Affairs (VA) lock activity continued to increase at the expense of agency volumes, a trend likely reflected in another decline in the average loan amount from $351,000 to $359,000.

Average credit scores rose to 723 in June while cash-out refinance scores fell to 693, the lowest since Optimal Blue began tracking the data in 2013. 

Black Knight’s monthly market monitor reports provide origination metrics for the U.S. and the top 20 metropolitan statistical areas (MSA) by share of total origination volume. 

The New York-Newark-New Jersey MSA had the highest rate lock volume at 4.5% in June. The Washington-Arlington-Alexandria area had the second-highest lock volume rate (3.8%) trailed by the Los Angeles-Long Beach-Anaheim (3.5%) area.

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