Overall mortgage rate-lock activity fell by nearly 20% month over month in December, according to the newest Originations Market Monitor report from Black Knight.
The 19.4% decrease in rate locks from November to December — the largest drop recorded in the five years since Black Knight began tracking — marked the ninth straight month of declining origination activity, per data from the analytics company. The fall was propelled by a 20.5% decrease in purchase loan locks, with affordability woes and high interest rates compounded by seasonal slowing to hold down homebuying activity even further.
“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 Black Knight division Optimal Blue. “The spread between mortgage rates and the 10-year Treasury yield narrowed another 22 bps (basis points) during the month to 264 bps, 40 bps off the recent high, but is still up 81 bps for the year.”
The unfavorable rate environment also continued to hold down refinance lending, with cash-out loans and rate-and-term refis down a respective 87% and 93% year over year. Total refinance activity made up only 16% of December’s rate lock activity.
Looking at the number of rate locks rather than their total dollar volume, the overall lock count was down almost 70% annually. Purchase lock count was down 47% year over year and down 33% below the pre-pandemic level of 2019.
In fact, the number of purchase locks in December was the lowest for a single month since early 2014, while total locks during the month were the fewest since Black Knight started tracking in January 2000. Dubiously, another new low in the number of refinance locks also was set in December — the fourth consecutive month of record lows. The number of mortgage holders locking in a rate to refinance is more than 50% below the pre-pandemic record low, which was set back in July 2000.