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Rate Locks Hit Record Lows For Second Consecutive Month

Black Knight, Inc. (NYSE:BKI) released its latest Originations Market Monitor report, looking at mortgage origination data through December month-end. Leveraging daily rate lock data from Black Knight’s Optimal Blue PPE – mortgage lending’s most widely used pricing engine – the Originations Market Monitor provides the industry’s earliest and most comprehensive view of origination activity.

“Mortgage rates declined through the first half of December but reversed course as the Fed doubled down on their stance of additional tightening in 2023,” said Kevin McMahon, president of Optimal Blue, a division of Black Knight. “The spread between mortgage rates and the 10-year Treasury yield narrowed another 22 BPS during the month to 264 BPS, 40 BPS off the recent high, but is still up 81 BPS for the year.”

The month’s pipeline data showed overall rate lock dollar volume down 19.4% month over month, the lowest level in the five years Optimal Blue has been tracking the metric. The decline was driven by a 20.5% drop in purchase locks, reflecting the strong impact of seasonality and affordability pressures. Refinance activity continued to fall by double digits, with cash-outs now down 87% and rate/term down 93% from December 2021. Combined, refinance activity made up 16% of the month’s lock activity.

When excluding the impact of record home price changes on volumes by looking at the raw number of lock counts, the data shows the number of purchase locks in December down 47% year-over-year and down 33% compared to pre-pandemic levels in 2019, with overall rate lock counts down nearly 70% from last year’s levels.

“Using Black Knight’s McDash mortgage performance data to provide comparative history, December saw the fewest purchase locks in a single month since early 2014, and the fewest overall rate locks on record dating back to January 2000 when Black Knight began reporting origination metrics,” McMahon continued. “The number of mortgage holders locking in a rate to refinance their existing mortgage also set a new record low for the fourth consecutive month.”