Mortgage rate locks grow for first time in four months

Despite a bevy of headwinds led by the swift rise of mortgage interest rates to the start the year, January saw rate-lock activity grow, according to data from Black Knight.

Overall rate locks were up 9.5% from December, fueled by a 19.9% gain in purchase loan locks and a 9.2% increase in cash-out refinance locks. The growth in loan activity juxtaposed against current market conditions made for an interesting phenomenon, said Scott Happ, president of Black Knight’s Optimal Blue division.

“Amidst a backdrop of the omicron variant, inflation concerns, Fed tapering and multiple rate hikes on the horizon, mortgage rates soared over the first weeks of 2022,” Happ said.

Black Knight’s daily interest rate tracker, the Optimal Blue Mortgage Market Indices, showed the average conforming rate for a 30-year loan at 3.77% at the end of January — the highest rate since March 2020 at the start of the COVID-19 pandemic. Despite this increase, however — and possibly, because of it — rate-lock activity in January rose for the first time in four months.

Happ noted that the rise of cash-out loans makes sense given the $10 trillion in collective tappable equity held by homeowners across the country. The jump in purchase locks, on the other hand, is partially seasonal and somewhat attributable to typical pent-up demand after the holiday season. 

“It could also represent skittish homebuyers hoping to lock in a still historically low rate being spurred to action by the quick acceleration in 30-year offerings over the opening weeks of the month,” he said. “Of course, inventory constraints continue to serve as headwinds on purchase origination, as does homeowner affordability in the face of rising rates and home prices.”

This is reflected in January’s average loan amount, which grew to $347,300, up $6,400 from December, according to Black Knight. The rate of loan amount increases has been accelerating in recent months with January’s gain up a whopping 60% compared to December’s.

Meanwhile, with rates on the rise, rate-and-term refi locks plummeted for a fifth straight month, dropping another 16.5% to their lowest level since May 2019. Rate-and-term locks are down 80% year over year, helping to shave the refinance share of all originations in January to only 43% — the lowest rate since July 2019.

And with persistent home-price growth, nonconforming loan products — especially jumbo loans — continued to gain market share at the expense of agency-backed loans. Black Knight reported that nonconforming loan products accounted for 16% of the origination market in January, up from 9% in the same month last year.


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