The latest Mortgage Monitor Report [1] published by Black Knight’s [2] Data and Analytics division revealed that even in the midst of typical seasonal downturns, rate lock volumes declined 19.4% in December 2022 as still elevated mortgage rates sidelined masses of potential homeowners.
According to Kevin McMahon, President of Black Knight’s Optimal Blue division, rate lock volumes fell to their lowest levels in the five years that Optimal Blue has been tracking this metric. This decline was driven by a 20.5% drop in purchase locks, “reflecting the strong impact of seasonality and affordability pressures.”
In addition, refinance activity continued to fall by double digits, as cash-out and rate/term refinances are down 87% and 93% year-over-year, respectively.
“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. The spread between mortgage rates and the 10-year Treasury yield narrowed another 22 basis points during the month to 264 basis points, which is 40 basis points off the recent high, but is still up 81 basis points for the year.”
“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.”
Other data highlighted by Black Knight includes:
- Purchase locks fell 20.5%, while rate/term refis dropped 11.2% and cash-out refis were down 14.1%, with total refinance locks making up 16% of the month’s overall activity
- Optimal Blue Mortgage Market Indices from Black Knight showed 30-year rates dipping below 6.25% in mid-December before reversing course to finish the month at 6.52%, roughly even with the previous month
- Seasonal headwinds combined with interest rate and affordability pressures continue to challenge purchase lending, with the dollar volume of such locks down 45.9% over the past three months and down 48.9% from December 2021
- Purchase lock counts – which exclude the impact of home price changes – were down 47% year-over-year with total rate lock counts down nearly 70% over that same span
- Using Black Knight’s McDash mortgage performance data to provide comparative history, that represents the fewest purchase locks in a single month since early 2014, and fewest overall rate locks on record dating back to January 2000 when Black Knight began reporting origination metrics
- The number of mortgage holders locking in a rate to refinance hit a record low for the fourth consecutive month in December, and is now more than 50% below the previous record low set back in July 2000
- Credit scores for cash-out refinances rose 5 points to 691 (down 34 points over the past 12 months) and fell 4 points for rate/term refinances but remained unchanged for purchase transactions