Black Knight’s January Origination Market Monitor Report shows that overall rate locks were up 9.5% from December, driven by a 19.9% and 9.2% increase in purchase loans and cash-out locks, respectively.
"Amidst a backdrop of the Omicron variant, inflation concerns, Fed tapering and multiple rate hikes on the horizon, mortgage rates soared over the first weeks of 2022," said Scott Happ, president, Optimal Blue, a division of Black Knight.
"Our (optimal blue mortgage market indices) OBMMI daily interest rate tracker showed the average 30-year conforming rate at 3.77% at month's end — the highest rates we've seen since March 2020, heading into the pandemic,” Happ continued. “Still, despite this increase — and in some ways, because of it — lock activity improved in January for the first time in four months. Of course, rate/term refinance activity continued to fall, but strong growth in both purchase and cash-out refi locks helped drive a nearly 10% month-over-month jump in overall lock activity."
In a long-running trend, rate/term refinance lending activity fell for the fifth consecutive month, dropping another 16.5% — the lowest level since May 2019 — marking an 80% year-over-year decline.
Refinance shares of January’s origination mix fell 43%, although that’s not a surprise considering how mortgage rates are increasing. This steep drop-off puts refinance shares at the lowest percentage of the market since July 2019.
Non-conforming loan products, such as jumbo loans, continued to gain market share at the expense of agency volumes in the midst of accelerating home price growth. Overall, non-conforming loan products account for 16% of the origination market, up from 9% this time last year.
"With some $10 trillion in homeowner tappable equity in the market, it makes sense that we'd see cash-out refinance locks on the rise," Happ added. "The significant jump in purchase originations can likely be attributed in part to typical pent-up, post-holiday demand. It could also represent skittish homebuyers hoping to lock in a still historically low rate being spurred to action by the quick acceleration in 30-year offerings over the opening weeks of the month. Of course, inventory constraints continue to serve as headwinds on purchase origination, as does homeowner affordability in the face of rising rates and home prices. This bears out in the increase we've seen in the average loan amount, which rose yet another $6,400 in January to $347,300. The rate of those increases has been on the rise and trending higher in recent months as well, with January's rise marking a 60% higher increase than December's jump."
