Mortgage rate locks drop amid sharp rate hike

According to reports from Mortgage capital negotiation and Black Knight watch.

Total mortgage rate locks by dollar volume fell 5% in April from the previous month, according to MCT’s Monthly Mortgage Locks Volume Indexes report. Compared to the same period last year, the number of rate locks by mortgage volume decreased by 25.4%.

The average 30-year conforming mortgage rate climbed to 5.27% last week, marking the highest average since 2009, according to Freddie Mac PMM. Black Knight’s Optimal Blue OBMMI pricing engine, which takes into account rollovers and additional data from the Mortgage Bankers Associationended April at 5.42%.

Refinancing suffered the biggest impact from the upward pressure on rates. Rate locks for rate and term refinances, which are primarily driven by lowering interest rates to reduce monthly mortgage payments, were down 36.4% in April from the previous month. Compared to April 2021, interest rate and term refinancing fell by 89.2%.

Cash-out refinance activity, on the other hand, is driven by the increase in home values ​​by homeowners looking to tap into the equity in their homes. In April, withdrawal rollover rate locks were down 31.1% from March and 51.7% from a year earlier.

Black Knight’s monthly mounts market watch report showed a similar downward trend in mortgage rate locks. Locked rate production volume activity was down 20.3% month-over-month, due to a 50% decline in term refinance lending activity.

Cash-out refi locks fell 40% in April as homeowners likely seek other products, including home equity line of credit [HELOCs] or second sheets, to access workable equity without sacrificing historically low first mortgage rates, which were secured by real estate as collateral.

In a traditional home equity product, the lender pays a lump sum cash payment to the buyer, who then pays off the loan in fixed rate payments. A HELOC, on the other hand, is a revolving line of credit that allows you to borrow as needed, with a variable interest rate.

The decline in rate foreclosure activity in April is “not surprising,” said Scott Happ, president of Optimal Blue, citing half of all mortgage holders holding current first lien rates below 3.5%. The combined decline in refinance locks sent the refinance share of the market down to 20% last month, marking the lowest point on record since at least January 2018, when Optimal Blue began tracking the metric.

“That being said, while purchase lockdowns were down somewhat from March, they were flat from last April, reflecting steady and resilient demand from homebuyers,” Happ said in a statement. .

Buy rate locks as measured by MCT, however, were up 2.2% month-over-month in April and 7.55% year-on-year, “a bright spot even though mortgage rates have risen rapidly in 2022.”

MCT, founded in 2001, launched its first monthly mortgage lock volume report on Monday. The indices are based on the actual dollar volume of blocked loans, not the number of requests.

“Especially in a tight buying market. Applications are a less reliable metric for the mortgage industry, as there is a greater likelihood of having multiple applications per funded loan,” the MCT report notes.

Black Knight’s monthly Market Monitor reports provide origination metrics for the United States and the top 20 metropolitan statistical areas by share of total origination volume. The New York-Newark-Jersey City areas had the highest rate lock volume at 4.1% in April. The Los Angeles-Long Beach-Anaheim areas had the second highest lock volume rate (3.9%), behind the Washington-Arlington-Alexandria area (3.8%).

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