Mortgage rate lock volume plummeted 20% in September as rates soared

Purchase rate lock volume fell 20%, cash-outs were down 17% and rate/term refis declined 18% MoM in September

Mortgage-rate-lock volume fell 20% in September, led by a combination of seasonal decline in purchase activity and rising interest rates, according to Optimal Blue’s Originations Market Monitor report.

September’s rate-lock decline continues a four-month trend of falling mortgage volumes, with month-over-month purchase locks down 20%, cash-outs down 17% and rate/term refinances down 18% in September. Total loan volume fell 33% over the same period compared to a year ago.

““The refi share of total lock volume ticked slightly higher from 12% to 13%, primarily as a result of seasonal purchase declines. Cash-out volumes continue to be the lion’s share of refis at roughly double that of rate/term volumes, with virtually no mortgages in the money to refinance,” Scott Smith, interim CEO of Optimal Blue, said.

Purchase lock counts – which exclude the impact of rising home prices – were down 32% year over year, and 39% from pre-pandemic levels in 2019.

While conforming loans still made up the majority of production at 57% in September, conforming volumes trended well below pandemic levels, according to the report. 

FHA and VA loan production both gained in activity share to 20.6% and 10.4%, respectively. The lock-production share of nonconforming loans – including both jumbo and expanded guideline loans – grew in September to comprise 11.1% of the total.

The average loan amount increased to $353,000 in September while the average purchase price on locked loans remained the same at $450,000.

The 30-year conforming fixed rate rose 33 basis points during the month to close at 7.41%, according to the Optimal Blue Mortgage Market Indices. Rates for FHA loans averaged 7.18%, VA loans were 7% and jumbo loans were 7.6%. 

The 30-year, conforming rate spread to the 10-year Treasury yield narrowed 17 basis points, with the 10-year ending September at approximately 4.6% – nearly 40 basis points above the highs set last fall.

“As the market reacted to the Fed’s ‘higher for longer’ message, we saw mortgage rates pushed to multi-decade highs in September,” Smith noted. “We also continue to see average credit scores remaining high, suggesting tight credit availability and a relatively small cohort of buyers who can make a purchase in this historically unaffordable environment.”

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