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Mortgage

Cash-out refis starting to slow despite equity gains

Black Knight data shows cash-out refi rate locks fell by double-digits in February

Mortgage origination activity took a major hit in February, with rate hikes squeezing out refinance activity, both for rate-term refis and cash-outs.

Overall origination activity in February was down 5.4% from January, according to the latest monthly Mortgage Monitor report from Black Knight. Purchase locks, which are not as rate-sensitive as refinancings, were up 7.2% in February over the prior month, with volumes up 5.6% from the same time last year.

But larger macroeconomic forces significantly depressed interest for refis. According to Black Knight, rate-term refi originations were down 34.1% from January and cash-out refis fell 15.3%. Overall lock activity was down 34.5%. The mix of refi volume fell to just 35%the lowest point since May of 2019, when interest rates were at a comparable level – just above 4%.

“Driven by Fed policy and exacerbated by global instability, we’ve seen the spread between 30-year conforming rates and 10-year Treasury yields climb more than 40 basis points in just three months, topping 2.25% in February,” said Scott Happ, president of Black Knight’s Optimal Blue division.

Rate-term refinance lending activity was down for the fifth consecutive month – falling to the lowest level in three years – and is down 80% from 2021 levels. Cash-out locks – which have been somewhat insulated due to strengthening home values, were down 6.3% over last year. Cash-out refis had a current value of 49 (total volume indexed to 100 in February 2018) and rate-term refis had a current value of 22, while purchase was at 132 in value in February.

The refi pull-thru fell to just 68.6%, according to Black Knight.


The originations landscape is shifting – is your business ready?

HousingWire recently spoke with Jon Gerretsen, SitusAMC Managing Director of Residential New Originations and Fulfillment Services, about the home buying boom and how lenders can gain market share and drive profitability in a white-hot purchase mortgage market.

Presented by: SitusAMC

“While refinance activity took a hit in February due to sharp rises in conforming rates, purchase lending rose again on strong homebuyer demand,” Happ said in a statement. “The 7.2% month-over-month increase in purchase locks pushed February purchase volumes up 5.6% from the same time last year. The average home loan amount continues to climb in the face of rising home prices and tightening affordability. Indeed, February’s $6,500 jump pushed that average to just under $354,000. In turn, nonconforming products – including both jumbos and loans with expanded guidelines – accounted for a full 17% of the month’s lock activity.”

Black Knight found that rate lock volume declined the most in the San Diego-Carlsbad, CA region, down 17.6% from the month prior. That market had the highest share of refis in the country at 45%, largely on the basis that home values had accelerated so greatly. Las Vegas-Henderson, Paradise, Nevado had the highest increase in rate lock volume, at 3.7%.

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