Lock volumes increased across the board last month, with purchase locks seeing the greatest gains of any March in the past five years.
Rate locks dollar volumes rose by 43% thanks to retreating rates and greater demand, according to Black Knight’s latest Originations Market Report.
Rates fell by 24 bps by the end of the month, impacted by banking sector uncertainty. They are continuing to shrink moving into April, hitting 6.28% last week.
“It is not unusual for rate locks to surge in March ahead of the spring homebuying season, although this year’s rise outpaced what we typically see on a seasonal basis,” said Andy Walden, vice president of enterprise research at Black Knight.
Purchase locks were up 44% month-over-month in March, handily beating the 30% average increase the month has seen in recent years.
“This continues to be an incredibly rate-sensitive housing market, and March’s rate lock activity perfectly illustrates this dynamic,” Walden said. “In the wake of uncertainty in the banking sector and investors’ flight to the safe haven of U.S. Treasuries, rates came down roughly a quarter of a point. The result? Another quick surge in originations, particularly in the purchase market.”
Though the monthly increase is a step in the right direction, purchase lock counts are still below last year’s levels.
Refinances also increased, both for cash-outs (+31%) and rate/term locks (+36%), though both remain near record lows. The rise in purchase locks forced refinance volumes down to a 13% market share, a cycle low.
FHA lock volumes increased their market share to 20%, up from 18% at the beginning of the year and 12% the year prior.
Walden noted that a reduction in FHA mortgage insurance premiums and an increase in the FHA-to-conforming spread made these loans more attractive.
The Mortgage Bankers Association has attributed the increase in FHA loans to the increasing difficulty for first-time homebuyers to qualify for conventional loans due to rising home prices. These loans require lower minimum credit scores and down payments than conventional loans typically do and therefore attract first-time buyers with limited cash.
The FHA recently approved a 40-year loan for certain homebuyers affected by Covid-19 or other financial hardships. It will go into effect in May.
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