Rate lock volumes sank in July as mortgage rates exceeded 7% for the first time since November 2022.
Black Knight’s Optimal Blue Mortgage Market Indices for July found that 30-year conforming rates cross 7% early in the month before bouncing down and up again, ultimately ending the month at 6.88%.
In line with rising rates, lock volumes dipped 7% from June.
“While they moved around a bit in July, there was no escaping the fact that conforming 30-year rates topped 7% in July for the first time since they spiked last fall,” said Andy Walden, vice president of enterprise research and strategy at Black Knight.
“On both a practical and psychological level, that put further downward pressure on mortgage demand. Purchase loans continue to dominate the origination pipeline, but current housing market dynamics are just not conducive to boosting homebuyer origination volumes.”
Purchase lending made up 88% of total activity as homeowners lack any incentive to refinance out of their low rates.
But even these were down 27% YOY and 35% compared to 2019.
Tightening credit will continue to put downward pressure on loans across the board. Lenders are privileging higher down payments, falling loan-to-value ratios, and higher credit scores. The average credit score for primary residence purchase locks rose to a record high in the first week of July before evening out for the rest of the month.
Lenders are also cutting out underutilized loan products as demand dwindles.
Walden noted that June is historically the month when home prices peak in a calendar year, leading to price declines through year-end. But this year has been far from “normal,” and until inventory picks up, prices seem to be on an upward trend.
“Rising rates may be tamping demand for homes at such record high prices, as evidenced by rate lock activity, but they’ve still yet to overcome an even greater deficit of supply,” he said.
“As a result, the purchase market is in a stalemate.”
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