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Black Knight: Rate Lock Data Suggests 2020 Originations Will Surpass $4 Trillion for First Time Ever

This month, Black Knight looked into rate lock data – historically a good indicator of lending activity – and found that Q3 2020 mortgage originations are set to break quarterly records in terms of refinance, purchase and total lending volumes. As Black Knight Data & Analytics President Ben Graboske explained, the data and market conditions also suggest that origination volumes could remain elevated into November and beyond.

“Rate lock data from Black Knight’s Compass Analytics division shows that Q3 2020 mortgage originations are on track to break quarterly records across the board and remain strong moving into Q4,” said Graboske. “This suggests that origination and prepayment activity will likely remain elevated well into Q4 2020. September lock activity held relatively level with August, but through October 19, lock activity overall is up 4% from the month prior – with purchase locks up 6% and refinance locks up 3% thus far. Interest rates setting new record lows in mid- and late October will likely continue to fuel lock activity in coming weeks. 

“Assuming a 45-day lock-to-close period, not only could Q3 2020 set quarterly records for refinance, purchase and total origination volumes alike, but that volume could remain at or near peak levels through November 2020 – if not longer. Estimated origination volumes based on underlying locks suggest both Q3 refinance and total originations could be up 25% or more from Q2 while purchase lending could be up by 35% or more. This would push 2020 purchase lending to the highest level since 2005 and both refinance lending and total origination volumes to their highest levels ever. Indeed, total lending in 2020 is well on its way to easily eclipse the $4 trillion mark for the first time in history.”

This month’s report also found that – despite heavy, pandemic-related headwinds earlier in the year – home price appreciation has remained remarkably robust. The annual home price growth rate had slowed to 0% in May – the first time home prices were flat year-over-year since early 2012 – but have since skyrocketed, driven by record low rates, improved affordability and a severe shortage of available inventory. According to daily home price tracking data from Black Knight’s Collateral Analytics group, after seeing annual home price growth of 11.5% in August, annual appreciation accelerated to a startling 14.2% in September, the highest such growth rate in more than 15 years.  Much more detail can be found in Black Knight’s September 2020 Mortgage Monitor Report.