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Rate lock volume plummets in least affordable housing market in 40 years

Prospective homebuyers still face the least affordable housing market as rates climbed to nearly 7.3% in August

Rate lock volume fell 1.5% in August, the third consecutive decline as mortgage rates climbed to the highest level in more than 20 years.

Overall lock volumes were down 9.5% over the last three months and were 55% below that of August 2022, according to Black Knight’s August originations market monitor report. 

“Interestingly, we saw very slight upticks in both cash-out and rate/term refinance locks in August,” Andy Walden, VP of enterprise research for Black Knight, said in a statement. “From what the data is showing us, much of this still very scarce activity is occurring among first-lien holders with older mortgages, or with particularly low balances, for whom today’s rates become less of an issue.” 

Rate/term refis decreased 13.5% over the three-month period and 18.6% from the same period last year.

Purchase locks — which were down 1.9% from July and nearly 20% year over year — continued to make up 88% of all lock activity.

August was another rough month for mortgage borrowers from an interest rate perspective. 

The 30-year mortgage rate climbed to nearly 7.3% to hit their highest level in more than 20 years before ending the month at 7.07%.

Demand for adjustable-rate mortgage (ARM) loans slipped to 6.56% of total locks as jumbo rates finished the month at 7.46%.

“Current housing market dynamics continue to put a damper on mortgage demand. Rates did edge down toward the end of August, but prospective homebuyers still face the least affordable housing market in nearly 40 years,” Walden said. 

The average loan amount fell $6,000 to $352,000 in August, while the average purchase price on locked loans was down to $450,000.

The average credit score among primary residence purchase locks dropped slightly for the first time since November 2022, but remains close to an all-time high

Credit quality of conforming and FHA borrowers remains strong, but scores appear to have plateaued. 

The average score for a conforming loan edged lower by 1 point to 753, while FHA increased 2 points to 671 and VA remained steady at 712.

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