Yikes! Rate lock volume is down 60%, and it’s getting worse

Overall lock volumes were down nearly 10% from August and 60% from a year ago

As mortgage rates rose more than 90 basis points to finish September at 6.72%, overall rate lock volumes predictably fell sharply – down 10% from August and almost 60% off levels from 2021. 

Falling rate lock dollar volume was driven by a 26.2% drop in cash-out refinance locks in September from the previous month, which is now down 78% from the same period in 2021, according to Black Knight’s originations market monitor report. Rate/term locks, which had been falling precipitously in recent months, marginally declined 0.1% from August but was down 93.3% from September 2021.

Interest rates that are at a 15-year-high and affordability challenges changed the mortgage origination market for the rest of the year as well as the foreseeable future, said Scott Happ, president of Black Knight’s Optimal Blue. 

“Home prices are pulling back in a growing number of markets, but across the country, affordability remains a challenge,” Happ said. “Given these realities, it’s not particularly surprising that rate locks are falling sharply,” Happ said. 

Purchase rate lock counts, which exclude the impact of soaring home values on dollar volume, are down more than 10% from 2019 levels, marking the third consecutive month that the number of purchase locks has fallen below pre-pandemic norms, Black Knight said. 

Data also shows that about 90% of all active first-lien mortgages have current rates below 5%, putting the population of rate/term refinance candidates at an all-time low. As a result, the refinance share of the market hit a new low of 16% in September.

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

With affordability headwinds already high and interest rates rising almost a full percentage point in September, there was a smaller appetite for riskier loans – lower credit score and high loan-to-value (LTV) loan programs. 

The mortgage credit availability index, measured by the Mortgage Bankers Association, fell for seven consecutive months in September dropping by 5.4% to 102.5. A decline in MCAI, benchmarked to 100 in March 2012, indicates that lending standards are tightening while an increase in the index suggests a loosening of credit.

“As mortgage rates have more than doubled over the past year, resulting in a drop in refinance activity, lenders have worked to reduce excess capacity and costs by eliminating underutilized loan programs,” Joel Kan, MBA’s associate vice president of economic and industry forecasting.

All the component indices declined in September, with most of the indices falling to their lowest levels in over a year. 

The conventional MCAI decreased 4.9%, while the government MCAI decreased by 5.7% to its lowest level since April 2013. Of the component indices of the conventional MCAI, the jumbo MCAI decreased by 5.8% and the conforming MCAI fell by 3.6%. 

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