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- Inventory woes are putting pressure on purchase lending and refinance activity tightens despite historically-low interest rates.
- Overall rate locks were down 4.7% from April, with a more pronounced 8.2% decline in rate/term refinance locks.
Black Knight, Inc. released its latest Originations Market Monitor report, looking at mortgage origination data through May 2021 month-end. Leveraging daily rate lock data from Black Knight's Optimal Blue PPE. According to the report, locks are down across all mortgage products, particularly in rate/term refinances.
“Though interest rate offerings trended downward across all mortgage products in May, overall rate locks were still down across the board,” said Black Knight Secondary Marketing Technologies president Scott Happ. “The severity of shortages in for-sale inventory seems to be a key driver behind the 3.4% decline in purchase locks from April, but the dip in refinance locks seems to have more to do with borrower psychology. Certainly, February's rise in rates drained some of the excitement in the market, but despite significant increases in refinance incentive since then, refinance activity simply hasn't rebounded as expected.”
The month's pipeline data showed that overall rate locks were down 4.7% from April, with a more pronounced 8.2% decline in rate/term refinance locks, according to the report. The refinance share of the market mix dropped again in May, accounting for just 44% of the month's origination activity.
On an annual basis, only rate/term refinance lending is down from last April (-45%), whereas both cash-outs (+32%) and purchase loans (+43%) are up year-over-year, according to the Originations Market Monitor.
"As interest rates declined from March through May, refinance incentive rose by 15%," Happ continued. "This brought the number of high-quality refi candidates in the market to over 14 million as of the end of May, but rate lock volume has failed to keep pace. Refinance rate locks are instead down 27% over the same time frame, decelerating in what would otherwise be a time of expected acceleration."
Explore more mortgage lock data from the Black Knight's May 2021 Originations Market Monitor Report.