Rate Locks Falls In September

Higher rates aren’t just impacting mortgage demand, they are also impacting rate locks which saw a 9.7% drop in August, according to the latest Black Knight Originations Market Monitor report…(Black Knight)

  • Purchase and cash-out rate locks saw a 6% decline from August.
  • Rate/term refinance locks saw a bigger drop at 18.7% and is now down nearly 60% year-over-year.

NOTE: The decline in rate/terms and cash-outs means the refi share of the market is back down below 50%. Last month that threshold had been broken for the first time since February

The overall average credit score held steady at 731 in August even with a slight drop among refis…

  • The average credit score for purchases was unchanged 730, cash-outs saw a one pint drop to 729, and rate/term refis fell two points to 735.

Scott Happ, Black Knight Secondary Marketing Technologies President, noted the psychological impact when rates climb above 3%…

  • “We’ve noted the ‘psychological threshold’ of sub-3% rates in the past, with movement below that line triggering increased lending activity…What we’re seeing now represents the other side of that coin in a certain sense. It remains to be seen how much higher rates will climb – and how quickly – and in turn, how borrowers will react.”

TYLER’S TAKE: A drop in cash-outs because of a climbing rates is a good sign that the housing market, despite low inventory and rising prices, is stable. Before 2008, cash-outs were driven by homeowners looking to max out their equity because of financial strain or recklessness. That is far from the case in 2021.