Rate Locks Fall 10% in September

As rates skyrocketed in September, rate locks plummeted by almost double digits, according to Black Knight’s latest Originations Market Monitor report.

  • M-O-M: Overall rate lock volume was down 9.9% from August, this is now down 30% in just the last three months.
  • Y-O-Y: Total rate lock volume is down 60% when compared to the same time last year.

Cash OUTS. Cash-out refinancing plummeted in September with a 26.2% decline from August. Cash-outs are now down 78.8% when compared to September 2021.

  • Purchases were down 7.6% for the month and are now down 29.4% year-over-year while rate/term refinancing was down only 0.1% from August and is now down 93.3% compared to the same time last year.

Scores Remain High. Credit scores remain high despite concerns about lenders possibly lowering standards to drum up business. Rate/term refinancing saw the average credit score jump five points to 738, two points higher than one year ago.

  • Purchases saw zero change month-over-month or year-over-year with an average credit score of 730 and cash-outs did see two points dip to 693 which is 36 points lower than one year ago.
  • The average credit score for a conforming mortgage product is 747, this is unchanged from last month and from one year ago.

Skyrocketing Rates. Mortgage rates absolutely skyrocketed in September with the 30-year fixed up 91 basis points to 6.72%. The three-month delta was up 93 and the year-over-year is now up 352 basis points from the same in 2021.

Analysis. Scott Happ, president of Optimal Blue, says skyrocketing rates and affordability concerns are forcing a pullback of home prices. “Home prices are pulling back in a growing number of markets, but across the country, affordability remains a challenge. This is likely one reason why non-conforming loans gained market share and we saw an increase of the average loan amount. The decline in purchase lock volumes bears this out as well. Purchase lock counts – which exclude the impact of soaring home values on dollar volume – show we’re down more than 10% from 2019 levels, marking the third consecutive month that the number of purchase locks has fallen below pre-pandemic norms.”

BOTTOM LINE: As rates rise fewer people can afford a home which means fewer rate locks.