Black Knight Originations Market Monitor: Despite a Plateau in Rates, Mortgage Production Fell Again in May, With Rate Locks Down Across All Loan Purposes

Rhea-AI Summary

Black Knight, Inc. (NYSE:BKI) released its latest Originations Market Monitor report, indicating a decline in mortgage production despite a temporary plateau in conforming 30-year rates, which ended May at 5.34%. Overall rate locks dropped by 4.8% month-over-month, with refinance activity plummeting 23.6% and purchase locks down 2.3%. Government-backed loans gained market share, while borrower credit scores fell significantly. This reflects a challenging market environment characterized by high prices and limited inventory.

Positive

• Government-backed FHA and VA loans gained market share.
• Purchase locks constituted 82% of total origination activity, the highest since 2018.

Negative

• Overall rate locks decreased by 4.8% month-over-month.
• Refinance activity plunged 23.6% from April, marking an 89.9% year-over-year decline.
• Average loan amounts decreased from $362,000 to $359,000.
• Borrower credit scores dropped significantly, particularly in cash-out refinances, now averaging below 700.

• Black Knight's Optimal Blue Mortgage Market Indices tracked a rise in conforming 30-year rates entering May, which cleared 5.5% before pulling back to finish the month at 5.34%, down 7 basis points from April
• Despite the leveling off in rates, overall lock volumes fell another 4.8% from April, with monthly declines seen across both rate/term (-23.6%) and cash-out (-11.9%) refinances
• While purchase volumes fell 2.3% from April and were flat year-over-year, looking at lock counts – to exclude the impact of home price appreciation on volume – shows purchases down 8.5% from last May
• While struggling under high home prices, lack of inventory and a higher rate environment, purchases now make up the largest share of rate locks (82%) since Optimal Blue began tracking the data in 2018
• Government-backed FHA and VA locks captured additional market share from conforming products, a trend also likely reflected in the decline seen in the average loan amount
• Borrower credit scores fell in May, led by another steep drop in cash-out refinance credit scores, which are now below 700 on average, down 20 points in the last three months and 33 points year-over-year

JACKSONVILLE, Fla., June 13, 2022 /PRNewswire/ -- Today, Black Knight, Inc. (NYSE:BKI) announced the release of its latest Originations Market Monitor report, looking at mortgage origination data through May month-end. Leveraging daily rate lock data from Black Knight's Optimal Blue PPE – mortgage lending's most widely used pricing engine – the Originations Market Monitor provides the industry's earliest and most comprehensive view of origination activity.

"At the start of May, it seemed mortgage interest rates would continue their upward climb and, indeed, rates did rise above 5.5% before pulling back some 20 basis points," said Scott Happ, president of Optimal Blue, a division of Black Knight. "Ultimately, our OBMMI daily interest rate tracker showed 30-year conforming offerings finishing the month at 5.34%, down 7 basis points from last month. Still, despite this plateau in rates, rate lock volume continued to slide in May, with declines seen across all loan purposes."

The month's pipeline data showed overall rate locks down 4.8% month-over-month, with rate/term refinance lending activity down another 23.6% from April to mark an 89.9% year-over-year decline. Cash-out refinance locks also fell (-11.9%) and are now down 42.2% since last year. The combined decline in refinance locks pushed the refi share of the market down to just 18%, the lowest point on record since at least January 2018, when Optimal Blue began tracking the metric. Purchase lock volumes were down 2.3% from April and were flat year-over-year. However, when looking at lock counts to exclude the impact of home price appreciation on volumes, purchase locks were down 8.5% year-over-year in May. Government loan products gained market share as FHA and VA lock activity increased at the expense of agency volumes, a trend also likely reflected in the decline seen in the average loan amount from $362,000 to $359,000. Average credit scores also fell in May, led by another steep drop in cash-out refinance scores, which are now below 700 on average, down 20 points in the last three months and 33 points year-over-year.

"The month's data shows a market struggling under the weight of significantly higher rates than Americans have enjoyed for the better part of the last three years," Happ continued. "We've seen rate/term refinance activity essentially evaporate and cash-out activity is now suffering as well. While there is volume pressure across the board due to rising rates, purchase volumes are holding up the best and are now driving 82% of all origination activity. Lenders are now more reliant on the purchase market for origination volumes than they have been in 20 years. Meanwhile, the trifecta of low inventory, high prices and climbing rates that has created the least affordable housing market in 16 years continues to create headwinds for precisely that segment."

Each month's Originations Market Monitor provides high-level origination metrics for the U.S. and the top 20 metropolitan statistical areas by share of total origination volume. Much more detail on May's origination activity can be found in the full Black Knight Originations Market Monitor report, located here.

About Black Knight

Black Knight, Inc. (NYSE:BKI) is an award-winning software, data and analytics company that drives innovation in the mortgage lending and servicing and real estate industries, as well as the capital and secondary markets. Businesses leverage our robust, integrated solutions across the entire homeownership life cycle to help retain existing customers, gain new customers, mitigate risk and operate more effectively.

Our clients rely on our proven, comprehensive, scalable products and our unwavering commitment to delivering superior client support to achieve their strategic goals and better serving their customers. For more information on Black Knight, please visit www.blackknightinc.com/.

For more information:
Michelle Kersch
904.854.5043
michelle.kersch@bkfs.com

Mitch Cohen     
704.890.8158
mitch.cohen@bkfs.com

 

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SOURCE Black Knight, Inc.

FAQ

What does the latest Black Knight report say about mortgage rates in May 2022?

The report indicates that conforming 30-year mortgage rates rose above 5.5% before finishing May at 5.34%, down 7 basis points from April.

How did mortgage lock volumes change in May 2022 according to Black Knight?

Overall rate lock volumes fell by 4.8% in May compared to April, with a notable decline in refinance activity.

What trends were observed in purchase volumes in May 2022?

Purchase volumes were down 2.3% from April and down 8.5% year-over-year, indicating a struggle in the current market.

What is the significance of FHA and VA loans in Black Knight's latest report?

FHA and VA loans captured additional market share at the expense of conforming products, indicating a shift in borrower preferences.

What challenges did the mortgage market face according to Black Knight?

The market faced challenges including high home prices, low inventory, and rising interest rates, creating a less affordable housing environment.