Overall rate locks rose 9.5% month-over-month in January, with a 19.9% increase for purchase loans and a 9.2% increase for cash-outs, Black Knight reported in its Originations Market Monitor.
Rate/term refinance locks dropped for the fifth month straight, down 16.5% to its lowest level since May 2019. It is an 80% decline YOY. The refinance share of January originations fell to 43%, its lowest since July 2019.
“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,” Happ said.
“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.”
Home price appreciation is a dominating factor in the market, as first-time buyers bid against cash-rich investors and older buyers with tappable equity. The average loan amount rose $6,400 in January to $347,300, a “60% higher increase than December’s jump.”
Non-conforming loans products, especially jumbo loans, rose 9% YOY and now make up 16% of the market as home prices continue to climb.
Mortgage rates skyrocketed in the first weeks of the year, climbing to 3.77% by the end of January, their highest since March 2020.
“Still, despite this increase — and in some ways, because of it — lock activity improved in January for the first time in four months,” said Scott Happ, president, Optimal Blue, a division of Black Knight.
“Of course, 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.”
The industry is bracing for impending layoffs as refinance applications dry up.
“You’re going to see a number of mortgage companies cut operation staff…they will not have an option,” Tim Wilson, CEO of Prosperity Home Mortgage, told RISMedia.
Companies such as Interfirst Mortgage and Freedom Mortgage have already begun letting employees go. Better.com made headlines last year with a tasteless mass layoff over Zoom.