MortgageMortgage Rates

Rate lock activity rose sharply from December’s depths

While rate lock volume rose 32% in January, affordability pressures continue to challenge purchase lending: Black Knight

The drop in mortgage rates and seasonal tailwinds boosted mortgage rate lock activity by 32% in January, ending a nine-month streak of declines, according to Black Knight’s originations market monitor report.

“Mortgage rates declined in January, continuing a trend that began in early November 2022,” Kevin McMahon, president of Optimal Blue, a division of Black Knight, said in a statement.

The 30-year fixed-rate mortgages, tracked by its Optimal Blue Mortgage Market Indices, fell 36 points to 6.16% last month, continuing a downward trend that began in November. 

Purchase locks set the pace, rising 32%, while refinances increased as well, with rate/term locks up 37% and cash-out locks rising 25%, according to the report. 

Cash-out refinances remain down more than 85% from last year and rate/term refinances are still down more than 88% from the same month in 2021. The refi share of lock volume edged up slightly to 15%. 

Purchase lending accounted for 85% of the volume, but rate and affordability pressures have continued to challenge purchase lending. 

The dollar volume of such locks is down 44% year over year and 14% below January 2020 levels. The share of locks with adjustable rates fell to 8% in January as lower rates pushed borrowers back toward fixed-rate offerings. 

The largest 20 metropolitan statistical areas by lock volume all saw double-digit growth, with Chicago, Nashville and Charlotte producing 50% month-over-month gains from December.

An increase in rate lock activity is welcome news, but was also expected due to seasonal rebounds in January, McMahon said. He noted mortgage originations continue to face significant rate, affordability and inventory headwinds, and lock volumes are still down more than 60% from the comparable period last year.

“With rates picking back up in early February, it will be interesting to see whether the rebound in lock activity will hold,” McMahon said. 

The average loan amount rose from $336,000 to $340,000 while the average purchase price climbed from $419,000 to $421,000.

Credit scores fell four points among cash-out refis from December to January, which were also down 36 points over the past 12 months. Credit scores for rate/terms declined by nine points from the previous month but remained relatively unchanged for purchase transactions.

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