Lock Volume Down As Rates Rise

Total mortgage lock volumes fell 11% in May across all types of loans as rising rates kept buyers out of the market, according to Black Knight’s June Originations Market Monitor

Locks volumes fell across the spectrum, with rate/term and cash-out refinances down 9% and 13%, respectively, while purchase loan locks fell 11%.

“This continues to be a challenging environment for mortgage originators,” said Scott Happ, president of Optimal Blue, a division of Black Knight.

“Rate lock activity was down for the third consecutive month in June, with declines seen across all loan purpose types. Purchase mortgages – which currently account for 82% of all lock activity – fell 11% by volume from May and are now down nearly 16% from the same time last year. However, when we look at purchase lock counts to exclude the impact of soaring home values on volume, we see the number of purchase mortgages is off some 21% from last year’s levels.”

The report noted that rising interest rates impacted lock volumes significantly. June finished with rates at 5.79%, up 44 basis points from May.

The difference between the 30-year mortgage rate and 10-year Treasury yield increased further, rising 30 bps in June to 280 bps, above the long-term average of about 175 bps.

Increasing rates are pricing potential buyers out of the market. The typical monthly mortgage payment is up 51% YOY and 6.2% just from last month. Black Knight reported that purchases are down almost 21% YOY, though still 3% above 2019’s levels.

“The month’s data illustrates just how interest rate-dependent the originations market has become,” Happ said.

 “With 30-year rates hovering below 6% – still historically low – we’ve seen the rate/term refi market dwindle to next to nothing… Eventually, equilibrium will return; but, as of June, the market seems to be having trouble adjusting to a rate environment anywhere above the historically low levels reached during the pandemic.”