In The News

Mortgage Rate Lock Activity Falls As Rates Top 7% For First Time Since November 2022; Signs Of Credit Tightening Persist

Black Knight, Inc. released its latest Originations Market Monitor report, looking at mortgage origination data through July 2023 month-end. Leveraging daily rate lock data from Black Knight’s Optimal Blue PPE, the Originations Market Monitor provides a comprehensive view of origination activity. Here’s what the report found:

“While they moved around a bit in July, there was no escaping the fact that conforming 30-year rates topped 7% in July for the first time since they spiked last fall,” said Andy Walden, vice president of enterprise research and strategy at Black Knight. “On both a practical and psychological level, that put further downward pressure on mortgage demand. Purchase loans continue to dominate the origination pipeline, but current housing market dynamics are just not conducive to boosting homebuyer origination volumes.”

The month’s pipeline data showed rate lock activity fell for the second consecutive month, dropping 7% overall. Purchase locks, which accounted for 88% of all July activity, fell 7.4% from June. Longer term, purchase lock counts are down 27% year over year and 35% off 2019 pre-pandemic, levels. Cash-out refinances also declined.

(-5.4%) and are hovering close to 60% below where they were in July 2022 when interest rates averaged in the mid- to high 5% range. Rate/term refis increased by a modest 1.9% in July but remained down more than 31% year over year from an extremely low ceiling; July 2022 itself had marked a 93% year-over-year decline. Locks on such products will likely remain constrained for some time to come; just 3% of existing mortgage holders have first-lien rates at or above today’s levels.

“With home prices hitting new peaks across many parts of the country, and no end in sight to the for-sale inventory shortage, the housing market continues to reheat,” Walden continued. “It’s worth noting, however, that – in a ‘normal’ year – June typically marks the calendar peak of home prices on a non-adjusted basis, so you would normally expect to see a decreasing trend through year’s end and into February. That said, this year, and this market, have been anything but normal. Rising rates may be tamping demand for homes at such record high prices, as evidenced by rate lock activity, but they’ve still yet to overcome an even greater deficit of supply. As a result, the purchase market is in a stalemate.”