Rate Lock Activity Rose In March

Rate lock activity rose in March as homeowners move before rates rise further, according to Black Knight’s latest Originations Market Monitor report.

Mortgage rates exceeded 4.9% in March but dropped at the end of the month to 4.79%. The spread between mortgage rates and 10-year Treasuries climbed 20 basis points.

“Mortgage interest rates spiked in March, with 30-year offerings climbing 70 basis points over the course of the month,” said Scott Happ, president, Optimal Blue, a division of Black Knight. 

“And yet, despite seeing the fastest one-month rise in rates in nearly 13 years, we saw purchase lock volumes increase by 31% from February – likely as prospective buyers moved to lock in their loans before rates climbed any higher.”

Rate lock activity rose 19.1% from February thanks to a 31.5% bump in purchase lending. Purchase volume is now up almost 70% in three months. 

Cash-out locks rose by only 1.6% while rate/term refis fell 15.4%, down 81% YOY. The refinance share of the market is just 28%, its lowest since November 2018.

Non-conforming products now account for 18% of lock activity as home price growth continues accelerating. The average loan amount increased by $8,000 to a little under $362,000.

Non-QM loans are gaining steam in the industry, with many pros working to dissociate the term from the subprime loans that became infamous during the 2008 financial crisis.

“One of the most interesting things I still find with introducing non-QM to many people around the US market is the term subprime, which we all know got a lot of people into a lot of trouble many years ago. That concept is probably the most resonating idea around non-QM today,” Paul Jones, FMDC senior vice president of non-QM development and production, said in an MPA Talk podcast episode.

As demand for non-QM products grows, lenders are expanding their options. UWM recently announced it will accept personal or business bank statements in self-employed borrowers’ loan applications. Redwood Residential is launching a suite of expanded and new product offerings geared toward this group.

“One of the biggest things that any broker can do to boost their business with non-QM is to find the proper partner who has more than just product. Every day, we’re seeing new entrants into the non-QM space,” Jones said.