Mortgage RatesOrigination

Mortgage rate lock volume remained flat in October amid headwinds

Purchase lock counts were down 23% year over year in October, Optimal Blue data found

Affordability headwinds continued in the mortgage industry with mortgage rate lock volume remaining virtually flat in October. Both purchase and refinance volumes continued to wane in the face of the highest mortgage rates in over two decades, according to Optimal Blue’s originations market monitor report.

Rate-lock-dollar volume was also flat in October, ticking up 0.5% month over month. However, when adjusting for the extra business day, volume fell 4%. 

Purchase-dollar volume rose 1% but slumped 3% after the same adjustment. Refinance-dollar volume declined, with cash-outs falling 3% and rate-and-term refinances down 6%.

Purchase lock counts – which exclude the impact of rising/falling home prices – fell 23% year over year and 43% from pre-pandemic levels in 2019. The refinance share of lock volume remained at current-cycle lows of 12%.

“In October, we saw conventional, conforming volume fall to its lowest point since March, dropping to 56% of the total lock production,” said Brennan O’Connell, data solutions manager at Optimal Blue.

“The lost market share was primarily picked up by FHA production, which rose to 22% of total volume. FHA market share is now at the highest level seen since 2017. Non-agency and VA production finished October at 11.5% and 10.3%, respectively,” O’Connell added.

According to Optimal Blue’s mortgage market indices (OBMMI), the 30-year conforming rate peaked at 7.83% in October before clawing back to 7.78%, climbing 37 basis points (bps) from the end of September, the report showed.

“The mortgage rate spread to Treasuries also grew in October as investors sought safe-haven assets amongst geopolitical concerns in Europe and the Middle East. The spread widened by 8 basis points to finish the month at 290 basis points,” O’Connell said.

Jumbo mortgage rates climbed above 8% before finishing the month at 7.94%, up 35 bps month over month. FHA and VA loan rates rose 26 bps and 40 bps, respectively, both finishing the month at 7.4%. 

The steep surge in mortgage rates pushed more borrowers toward adjustable-rate mortgages (ARMs) in October, with the share of adjustable-rate locks rising to 7.9%, up from 6.8% in September.

The average loan amount dropped slightly to $352,500 in October from $353,200 the month prior, and the average purchase price fell to $449,000.

Although production trended lower nationally, certain warmer or more temperate markets saw month-over-month growth due to less seasonality in those climates, the report noted.

The Austin-Round Rock, Texas and Tampa-St. Petersburg-Clearwater, Florida metropolitan statistical areas (MSAs) both showed double-digit, month-over-month growth in mortgage rate lock volume in October.

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