Mortgage rates drop but not low enough to spur lending 

Rate lock volume fell across all loans last month, marking four straight months of decline

Mortgage rates trended down in July from their peak above 6% in June, but that wasn’t enough to spur mortgage lending activity.

Rate lock volume in July fell 14.4% from June, marking four straight months of decline, according to Black Knight‘s originations market monitor report. The decline was led by 16.9% drop in rate/term refinance locks, which are down 93.6% since last year. Cash-out refinancings dropped by 14.1% from June, and 67.2% year-over-year dip. 

The report pointed to refis dwindling as rates rose more than two percentage points from the beginning of the year. The refi share of the market remained the same from June at 18%, the lowest level since January 2018, when Optimal Blue began tracking the metric. 

The purchase lock count, which excludes the soaring home values on volume, is down 25.8% from 2021 and off 11% from 2019, marking the first month the number of purchase locks fell below pre-pandemic levels.

While the purchase share of the market remained the same from June, purchase volume fell by 14.3% from the previous month and dropped 22% from July 2021.

“Although 30-year interest rates actually pulled back slightly in July the originations market is still reacting to previous increases and continuing affordability challenges,” said Scott Happ, president of Optimal Blue, a division of Black Knight.

More than ever lender profitability requires maintaining pace with innovation

Lenders continue to face tightening profit margins as mortgage rates stay substantially higher than they were last year. In light of this, HousingWire recently caught up with Teraverde’s Rob Peterson to learn more about what lenders need to succeed in today’s lending environment.

Presented by: Teraverde

The 30-year conforming fixed-rate mortgage rates finished July at 5.30%, pulling back from the June peak of 6.06% ahead of the Fed’s rate hike of 75 basis points. Home prices for July aren’t available yet, but recent numbers reaffirm a cool down in the housing market.

According to Black Knight’s monthly mortgage monitor report, home price growth dropped for three consecutive months as of June, where price appreciation fell by nearly two percentage points to 17.3% in June from the previous month. 

Black Knight projected that the housing market would likely slow further in the coming months if mortgage rates remained persistently high.

The average purchase price among homes being financed fell by 2.2% or $10,000 in July and is now down by more than more than 6.6% or $31,000 since March as rising interest rates have eroded buying power and affordability in recent months.

Average credit scores fell to 722 in July while cash-out refinance scores fell to 692, 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 4.6% in July. The Washington-Arlington-Alexandria area had the second-highest lock volume rate (3.6%) trailed by the Dallas-Fortworth-Arlington (3.5%) area.

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