Rate Locks Set New Record Lows

Rate lock volumes took a beating in December as buyers and sellers remained on the sidelines.

Black Knight’s December Originations Monitor Report found that typical seasonal patterns, together with continuing inflationary pressures and elevated rates, resulted in record lows for locks of all kinds.

“Using Black Knight’s McDash mortgage performance data to provide comparative history, December saw the fewest purchase locks in a single month since early 2014, and the fewest overall rate locks on record dating back to January 2000 when Black Knight began reporting origination metrics,” said Kevin McMahon, president of Optimal Blue, a division of Black Knight.

Rate lock dollar volumes fell by 19.4% in December, their lowest level in the five years Optimal Blue has tracked this data.

Purchase locks dipped 20.5% and were 47% lower YOY.

Refis yet again saw serious declines, setting a new record low for the fourth consecutive month. Rate/term and cash-outs were down 93% and 87% YOY, respectively. Refinance locks made up just 16% of December’s activity.

Refinance locks are now down more than 50% from their previous record low in July 2000.

Interest rates have moderated since breaching 7% but remain in the mid-6s. They increased in the last weeks of the year.

Mortgage brokers who profited from the frenzy of pandemic purchases and refinances have felt the reversal strongly.

One broker called 2022 “the scariest year of [his] adult and professional life,” saying the turnaround has negatively impacted both his finances and mental health.

Experts say the best way to attract loyal clients is through engagement and consistent communication.

“A rising tide of record demand and historically low interest rates hid a lot of the challenges lenders have been facing in forging more meaningful, lasting connections with customers and moving beyond a transactional, rate-driven relationship,” said Tom Lawler, head of consumer lending intelligence at J.D. Power. 

“Now, as the macroeconomic situation has reversed course, these relationship-driven attributes have become critical for lenders that want to convey a more unique value proposition and build more lifetime customers in a highly competitive marketplace.”

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