In October, the Optimal Blue Mortgage Market Indices revealed significant developments in mortgage rates. The 30-year conforming rate reached its peak at 7.83%, eventually settling at 7.78%. This represented a 37-basis-point increase over the previous month, highlighting the continued upward trajectory of rates.
Jumbo rates also experienced an increase, surpassing 8% before ending the month at 7.94%, up 35 basis points month-over-month. FHA and VA rates followed suit, rising by 26 basis points and 40 basis points, respectively, with both ending the month at 7.4%. This steep increase in mortgage rates prompted a shift towards adjustable-rate mortgage (ARM) loans, accounting for 7.9% of locks, compared to 6.8% in September.
"Despite the Federal Open Market Committee’s decision to pause rate hikes, we saw rate headwinds continue in October,” said Brennan O’Connell, data solutions manager, Optimal Blue. “The mortgage rate spread to Treasurys also grew in October as investors sought safe-haven assets amongst geopolitical concerns in Europe and the Middle East. The spread widened by 8 basis points to finish the month at 290 basis points.”
The report also revealed that rate lock dollar volume remained relatively flat in October, edging up by 0.5% month-over-month. However, when adjusted for an additional business day, volume actually decreased by 4%. While purchase dollar volume saw a 1% rise, it declined by 3% after adjusting for this factor. Refinance dollar volume continued to decline due to historically high rates, with cash-out refinances dropping by 3% and rate/term refinances decreasing by 6%.
Purchase lock counts, which provide a better representation of housing activity by excluding the impact of fluctuating home prices, experienced a 23% year-over-year decrease and a 43% drop from pre-pandemic levels in 2019. The refinance share of lock volume remained at current cycle lows of 12%.
“In October, we saw conventional conforming volume fall to its lowest point since March, dropping to 56% of total lock production,” O’Connell continued. “The lost market share was primarily picked up by FHA production, which rose to 22% of total volume. FHA market share is now at the highest level seen since 2017. Non-agency and VA production finished October at 11.5% and 10.3%, respectively.”
Despite the national trend of declining production, certain geographical areas demonstrated strong month-over-month growth in October. The Austin-Round Rock, Texas, and Tampa-St. Petersburg-Clearwater, Florida metropolitan statistical areas (MSAs) both recorded double-digit growth in lock volume compared to September. Approximately half of the top 20 MSAs by volume reported an increase in lock production in October, often attributed to less seasonality in warmer and temperate climates.
Lastly, the report noted that the average loan amount slightly decreased from $353.2K to $352.5K in October, while the average purchase price dropped to $449K. Credit scores saw a modest increase across agency production, with average credit scores for GSE-eligible locks rising by 1 point, FHA locks by 2 points, and VA locks by 4 points.
