Data Confirms Mortgage Demand Up; Rates Down

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In yet another sign demand is beginning to return to the market, rate lock volumes rose 32% in January 2023 driven in part by the slow decline in mortgage rates, breaking what was a nine-month streak of declining rate lock volumes. 

In addition, purchase, and rate/term refinances all increased at rates of 32%, 37%, and 25%, respectively making up 15% of the month’s overall activity. 

This info comes from Black Knight’s monthly Originations Market Monitor, which also showed that 30-year fixed-rate mortgage recently dropped 36 basis points to 6.16% continuing a downward trend that started in November 2022. 

According to Black Knight, despite the improvement, rate and affordability pressures continue to challenge purchase lending, with the dollar volume of such locks down 44% year-over-year and 14% below levels seen since the pandemic began in January 2020. 

“Mortgage rates declined in January, continuing a trend that began in early November 2022,” said Kevin McMahon, President of Optimal Blue, a division of Black Knight. “Conforming rates dropped 36 basis points from where they were at the start of the year, and we saw that rates associated with those FHA/VA/jumbo locks all came down in kind. Triggered by this pullback, rate lock volumes rose for the first time since March 2022, driven by declining interest rates and seasonal tailwinds, snapping a nine-month streak of declines.” 

“While this month’s Originations Market Monitor certainly brings welcome news, it’s important to remember that we would have expected to see a seasonal rebound in January, regardless,” McMahon continued. “Mortgage originations continue to face significant rate, affordability and inventory headwinds, and lock volumes are still down more than 60% from the comparable period last year. With rates picking back up in early February, it will be interesting to see whether the rebound in lock activity will hold.” 

Other notable data from the report as highlighted by Black Knight includes: 

  • Purchase lock counts—which exclude the impact of home price changes—were down 41% year-over-year. 
  • Nonconforming loans—including jumbos and expanded guidelines—fell as a percentage of total volumes to just under 10%; conforming (58.5%), FHA (18.5%) and VA (12.4%) all picked up share. 
  • The average loan amount rose from $336K to $340K, while the average purchase price climbed from $419K to $421K. 
  • Credit scores fell 4 points among cash-out refis—now down 36 points over the past 12 months—and 9 points for rate/terms, but remained relatively unchanged (+1 point) for purchase transactions. 
  • The ARM share of lending dropped further in January to just above 8% of total locks, as lower rates pushed borrowers back toward fixed-rate offerings. 


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