Mortgage Capital Trading Inc. (MCT), a San Diego-based mortgage hedge advisory and secondary marketing software firm, said Friday that mortgage lock volume in June spiked 31% from May.
The increase in June’s lock volume activity, which is based on actual locked loans, comes after a 15% drop in May’s total locked production. “We saw originations toward the end of May slow down, so this is likely a summertime pickup in originations,” said Andrew Rhodes, senior director and head of trading at MCT. “High rates, low housing supply, and lack of affordability will continue to be the forces behind the lack of new originations.”
While the Federal Open Market Committee (FOMC) meeting minutes from June’s decision to pause rate hikes show some disagreement, additional rate hikes are expected and may continue to keep origination volume at a depressed new normal, Rhodes said.
“The current commentary coming from the Fed puts the market on its heels as there is a potential for another two rate hikes this year,” he said. “With this new narrative, rates will continue to push higher, especially if we see another strong labor market read coming out on Friday.”
This month’s MCT Indices also show a nearly 8% drop in total lock volume from this time last year, the company said. After hitting lows at the beginning of the year for purchase, rate/term refinance, and cash-out refinance, each production type continues to creep slowly upward.
Rhodes said economic reports will continue to have a big effect on the Fed’s decision-making and associated market movements.
“If labor markets cool off, that could give the Fed a reason not to raise rates in July,” he said, “which would provide a nice bounce in the markets, but I’m not holding my breath.”
The U.S. Bureau of Labor Statistics reported Friday that total nonfarm payroll employment increased by 209,000 in June, which was below analysts’ expectations of 235,000. The pace of job growth has slowed so far this year but remains above what the Fed would need to see to prevent another interest rate hike.
MCT said its Lock Volume Indices present a snapshot of rate lock volume activity in the residential mortgage industry, broken out by lock type (purchase, rate/term refinance, and cash-out refinance) across a broad diversity of lenders from its national footprint.
