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Mortgage Originations, Rate Locks Continued To Decline In July

David Krechevsky
Aug 08, 2022
rate lock

Purchase demand fell below pre-pandemic levels last month, Black Knight says.

KEY TAKEAWAYS
  • Purchase mortgages, which currently account for 82% of all lock activity, fell 14.3% by volume from June and are now down 22% from last year.
  • The refi share of the market held at just 18%, the lowest point on record since at least January 2018, when Optimal Blue began tracking the metric. 

Rate locks on home purchases fell below pre-pandemic levels in July, as overall purchase mortgage originations fell 14.3% from June, according to a new report.

Black Knight Inc. today released its July 2022 Originations Market Monitor (OMM) report, looking at mortgage origination data through the end of July. Utilizing daily rate lock data from Black Knight’s Optimal Blue PPE, the OMM provides the industry’s earliest and most comprehensive view of origination activity, Black Knight says.

“Mortgage originators continue to experience strong headwinds,” said Scott Happ, president of Optimal Blue, a division of Black Knight. “Rate-lock activity has been down four straight months, with declines across all loan purpose types.”

Happ said purchase mortgages, which currently account for 82% of all lock activity, fell 14.3% by volume from June and are now down 22% from last year.

“The purchase lock count, which excludes the impact of soaring home values on volume, is off 25.8% from last year,” he said. “That count is now down 11% from 2019, marking the first month the number of purchase locks has fallen below pre-pandemic levels, as affordability challenges continue to cool the housing market.”

Here are the key highlights from Black Knight’s OMM report:

  • The month’s pipeline data showed overall rate locks down 14.4% month over month, led by a 16.9% decline in rate/term refinance locks, which are now down 93.6% since last year. 
  • Cash-out refinance activity fell another 14.1% from June, a 67.2% year-over-year decline. 
  • The refi share of the market held at just 18%, the lowest point on record since at least January 2018, when Optimal Blue began tracking the metric. 
  • Government loan products gained market share as FHA lock activity increased at the expense of non-conforming loan volumes, a trend also likely reflected in another decline in the average loan amount — from $351,000 to $344,000. 
  • The overall average credit score in July was 722, with scores on cash-out refinances edging modestly lower to 692 — the lowest since Optimal Blue began tracking the metric in 2013.
  • Black Knight’s Optimal Blue Mortgage Market Indices tracked 30-year rates as they pulled back to end July at 5.3%, a drop of 49 basis points (bps) from June.
  • The average purchase price among homes being financed fell by another $10,000 (-2.2%) in July and is now down by more than more than $31,000 (-6.6%) since March,.

“Although 30-year interest rates actually pulled back slightly in July, the originations market is still reacting to previous increases and continuing affordability challenges,” Happ said. “Home prices have begun to pull back in some of the hotter home markets, particularly those on the West Coast. With the end of the traditional homebuying season approaching, we will be watching this trend closely.”

Each month’s Originations Market Monitor provides origination metrics for the U.S. and the top 20 metropolitan statistical areas by share of total origination volume, Black Knight said.

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