Black Knight Inc.'s latest Originations Market Monitor report revealed that rate lock volume increased by 1.3% in August 2021, bolstered by a 7.6% increase in cash-out refinance activity.
“After starting the month below 3%, interest rates spent much of August hovering just above that point, with the conforming 30-year at 3.05% at month's end, according to our OBMMI daily interest rate tracker,” said Black Knight Secondary Marketing Technologies president Scott Happ. “That sub-3% period seems to have been enough to spur some high-credit-score and high-balance borrowers to refinance, as average credit scores rose along with the non-conforming share of the market.”
The month's rise puts cash-out refinance lending up more than 41% over the last three months, according to the report. Additionally, Black Knight revealed that the increase in cash-out activity was enough to push the overall refinance share of the market mix back above 50% for the first time since February even with rate/term lending remaining essentially flat (-0.5%).
Locks on purchase loans were roughly flat, decreasing by 0.8% from July as rising home prices and constrained for-sale inventory continue to put downward pressure on purchase lending volumes.
“The rise in cash-out lending is hardly surprising given the extraordinary growth we've seen in tappable equity this year,” added Happ. “We've now seen cash-out activity increase for three consecutive months, and with $173,000 in equity available to the average homeowner with a mortgage and home prices still climbing, there is still room in the market for growth. With equity levels at record highs and interest rates broadly expected to tick upward in coming years, cash-out lending is likely to play a much larger part in the overall refinance market.”
Each month's Originations Market Monitor provides high-level origination metrics for the U.S. and the top 20 metropolitan statistical areas by share of total origination volume. The report explored mortgage origination data through August 2021 month-end, leveraging daily rate lock data from Black Knight's Optimal Blue PPE.
