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Mortgage rate locks across all categories dropped in May, according to research by MCT Data. Total rate lock volume year-over-year is down 29.5%.
Rapid rises in rates have kept would-be borrowers on the sidelines in 2022, MCT reported. Purchase locks are now on the decline, down 1.78% month-over-month and 10.1% from a year ago. The increase in mortgage rates is also evident, as refinance volume continues to fall. Rate/term refinances are down 29.6% and cash out refinances are down 9% month-over-month.
The May MCTlive! Lock Volume Indices, which include an adjustment for the Memorial Day holiday, show that total mortgage rate locks by dollar volume decreased 10.6% in May, and total lock volume is down 29.5% from a year ago as purchases now make up most of the volume. From one year ago, cash-out refinance volume is down 57.5%, while rate/term refinance volume has dropped 90%.
MCT said given rate/term refinance volume was already down 88% year-over-year in the April MCTlive! Lock Volume Indices, this month’s drop does not change the total much. However, loan sizes were up 8.3% over the past year, with the average loan amount increasing from $291,000 to $315,000.
MCT’s rate lock activity indices are based on actual dollar volume of locked loans, not number of applications. The company notes that, especially in a tight purchase market, MCT believes its methodology (using actual loans locked vs. applications) is a more reliable metric. There is a higher likelihood of having multiple applications per funded loan, and prequals do not convert at as high of a rate in the current market as has historically been the case — especially when applications are counted at the early stage of entering a property address.