Black Knight Originations Market Monitor: Mortgage Production Down for Third Straight Month in June, With Declines in Rate Locks Across All Loan Purposes

Rhea-AI Summary

Black Knight's latest Originations Market Monitor report reveals a downward trend in mortgage rate locks for June, marking the third consecutive month of declines. The 30-year mortgage rate spiked to 6% mid-month but settled at 5.79%, while the spread between mortgage rates and Treasury yields widened to 280 basis points. Total lock volumes fell 11%, with significant drops in cash-out refinances and purchase loans. Notably, the average credit score for cash-out refinances decreased to 693, the lowest since 2013, indicating market vulnerability in the current rate environment.

Positive

• Government-backed FHA and VA loans gained market share.
• Despite a year-over-year decline, purchase lock counts are still 3% above 2019 levels.

Negative

• Overall rate locks down 11.1% month-over-month.
• Cash-out refinance locks decreased 42.2% year-over-year.
• Purchase volumes down 15.6% year-over-year.
• Refinance market share at a record low of 18% since January 2018.

• Black Knight's Optimal Blue Mortgage Market Indices tracked 30-year rates as they crossed 6% in mid-June before pulling back to finish the month at 5.79%, a jump of 44 basis points (bps) from May
• The spread between the 30-year mortgage rate and 10-year Treasury yield continued to widen, climbing 30 bps in June and – at 280 bps – is well above the long-term average of roughly 175 bps
• Total lock volumes were down 11% from May, with declines seen in both rate/term (-9%) and cash-out (-13%) refinances, as well as purchase loans (-11%), which accounted for 82% of all lock activity
• Looking at purchase lock counts – to exclude the impact of home price appreciation on volume – shows purchases down nearly 21% from last June, but still 3% above 2019 levels
• Government-backed FHA and VA locks captured additional market share from conforming products, a trend also likely reflected by a further decline in the average loan amount
• The average borrower credit score on cash-out refinances fell another five points in June to 693, the lowest point since Optimal Blue began tracking the metric in 2013

JACKSONVILLE, Fla., July 11, 2022 /PRNewswire/ -- Today, Black Knight, Inc. (NYSE: BKI) announced the release of its latest Originations Market Monitor report, looking at mortgage origination data through June month-end. Leveraging daily rate lock data from the Black Knight 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.

"This continues to be a challenging environment for mortgage originators," said Scott Happ, president of Optimal Blue, a division of Black Knight. "Rate lock activity was down for the third consecutive month in June, with declines seen across all loan purpose types. Purchase mortgages – which currently account for 82% of all lock activity – fell 11% by volume from May and are now down nearly 16% from the same time last year. However, when we look at purchase lock counts to exclude the impact of soaring home values on volume, we see the number of purchase mortgages is off some 21% from last year's levels."

The month's pipeline data showed overall rate locks down 11.1% month-over-month, led by a 13.2% decline in cash-out refinance locks, which are now down 42.2% since last June. Rate/term refinance activity fell another 9.1% from May to mark a 90.4% year-over-year decline. The refi share of the market held at just 18%, the lowest point on record since at least January 2018, when Optimal Blue began tracking the metric. Purchase lock volumes were down 10.8% from May and down 15.6% year-over-year. Government loan products gained market share as FHA and VA lock activity continued to increase at the expense of agency volumes, a trend also likely reflected in another decline in the average loan amount – from $359,000 to $351,000. The overall average credit score in June was 723, with scores on cash-out refinances falling to 693 – the lowest it has been since Optimal Blue began tracking the metric in 2013.

"The month's data illustrates just how interest rate-dependent the originations market has become," Happ continued. "With 30-year rates hovering below 6% – still historically low – we've seen the rate/term refi market dwindle to next to nothing, with increasing downward pressure on cash-out activity. Purchase volumes are driving 82% of all origination activity and those volumes are on the decline as well – in the heart of the traditional homebuying season. Eventually, equilibrium will return; but, as of June, the market seems to be having trouble adjusting to a rate environment anywhere above the historically low levels reached during the pandemic."

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 June's origination activity can be found in the full Black Knight Originations Market Monitor report.

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 did the Black Knight Originations Market Monitor report reveal about mortgage rates in June 2022?

The report indicated that the average 30-year mortgage rate rose to 6% mid-month before finishing at 5.79%.

How much did total lock volumes decrease in June 2022 according to Black Knight?

Total lock volumes decreased by 11% from May.

What trends were observed in cash-out refinance locks in June 2022?

Cash-out refinance locks fell 13.2% from May and decreased by 42.2% year-over-year.

What was the average credit score for cash-out refinances in June 2022?

The average credit score for cash-out refinances dropped to 693, the lowest since 2013.

How did purchase mortgage volumes change in June 2022 compared to previous years?

Purchase volumes were down 15.6% year-over-year, but 3% above 2019 levels.