Black Knight's latest Originations Market Monitor report, examining mortgage origination data through January, has found that the month's pipeline data showed overall rate locks up 9.5% from December, driven by 19.9% and 9.2% increases in purchase loan and cash-out locks, respectively. Continuing a long-running trend, rate and term refinance lending activity fell for the fifth consecutive month.
"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," said Scott Happ, President of Optimal Blue, a division of Black Knight. "Our OBMMI daily interest rate tracker showed the average 30-year conforming rate at 3.77% at the month's end. These are the highest rates we've seen since March 2020, heading into the pandemic. Despite this increase, lock activity improved in January for the first time in four months. Rate & term refinance activity continued to fall, but strong growth in both purchase and cash-out refi locks helped drive a nearly 10% month-over-month jump in overall lock activity."
Rate/term locks dropped another 16.5% to their lowest level since May 2019, marking an 80% year-over-year decline. The refinance share of the month's origination mix fell to 43%, the lowest percentage of the market since July 2019. Non-conforming loan products continued to gain market share at the expense of agency volumes in the face of reaccelerating home price growth. Overall, non-conforming loan products now account for 16% of the origination market, up from 9% this time last year.
"With some $10 trillion in homeowner tappable equity in the market, it makes sense that we'd see cash-out refinance locks on the rise," said Happ. "The significant jump in purchase originations can likely be attributed in part to typical pent-up, post-holiday demand. 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. 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 bears out in the increase we've seen in the average loan amount, which rose yet another $6,400 in January to $347,300. The rate of those increases has been on the rise and trending higher in recent months as well, with January's rise marking a 60% higher increase than December's jump."
Each month's Originations Market Monitor provides high-level origination metrics for the U.S. and the top 20 metropolitan statistical areas by share of total origination volume.
Click here for the latest Black Knight Originations Market Monitor.