Cash-out refis skyrocketed in the last three months, while overall rate locks for mortgage originations increased in August, according to Black Knight’s latest Mortgage Origination Monitor report.
Rate locks rose 1.3% from July, driven by a 7.6% increase in cash-out refinancing activity. Refi lending is up 41% over the last three months, making refi the largest share of the market for the first time since February.
“The rise in cash-out lending is hardly surprising given the extraordinary growth we’ve seen in tappable equity this year,” Black Knight Secondary Marketing Technologies President Scott Happ said. American homeowners gained a record $1 trillion in tappable equity in the second quarter of 2021.
“We’ve now seen cash-out activity increase for three consecutive months, and with $173,000 in equity available to the average homeowner with a mortgage and home prices still climbing, there is still room in the market for growth. With equity levels at record highs and interest rates broadly expected to tick upward in coming years, cash-out lending is likely to play a much larger part in the overall refinance market.”
Rate/term lending stayed flat, falling .05%. Purchase loan locks held mostly steady too, down .8%. Average credit scores also rose, likely as a result of low interest rates at the beginning of the month.
“That sub-3% period seems to have been enough to spur some high-credit-score and high-balance borrowers to refinance, as average credit scores rose along with the non-conforming share of the market,” Happ said.
Here are some highlights from the report:
- Cash-out refi locks: +7.6%, up 30% over the same time last year
- Cash-out activity exceeded 50% of the market share for the first time since February
- Purchase movements (-0.8%) and rate/term refi (+0.5%) canceled each other out
- Black Knight’s OBMMI daily interest rate tracker showed August’s month-end conforming 30-year rate at 3.05%
- Average credit scores rose as high-credit borrowers took advantage of sub-3% rates early in the month
- Non-conforming loan products reclaimed market share in August, while all other products lost ground