Black Knight Originations Market Monitor: Mortgage Rate Lock Activity Falls as Rates Top 7% for First Time Since November 2022; Signs of Credit Tightening Persist

Rhea-AI Summary

Black Knight, Inc. (NYSE:BKI) reported that 30-year conforming rates crossed 7% for the first time since November 2022 before falling to 6.88%. Purchase lending accounted for 88% of lock volume, but was down 27% year over year due to higher interest rates and low inventories. The average purchase price was $456K with an average loan amount of $358K in July. Adjustable-rate mortgages (ARMs) fell to 6.79% of July's rate lock activity.

Positive

• The report provides comprehensive origination data, including rate lock activity and purchase lending trends.
• The information on credit tightening, falling loan-to-value ratios, and higher credit scores provides valuable insights into the current mortgage market.
• The report highlights the impact of rising interest rates and low inventories on purchase lock counts and average purchase prices.

Negative

• The decline in purchase lock counts and cash-out refinances could indicate a slowdown in the housing market.
• The decrease in rate/term refis suggests a decrease in refinancing activity.

• According to the Optimal Blue Mortgage Market Indices, 30-year conforming rates crossed 7% for the first time since November 2022, before falling sharply and then rebounding to 6.88%
• Overall rate lock volumes were down 7% month over month in July, with purchase lending continuing to make up the vast amount of lock volume, accounting for 88% of total lock activity
• Even so, purchase lock counts were down 27% year over year and 35% compared to 2019 pre-pandemic levels, as higher interest rates and persisting low inventories dampened demand
• As reported in Black Knight's most recent Mortgage Monitor report, signs of credit tightening have been seen in July locks in rising down payments, falling loan-to-value ratios and higher credit scores
• Average purchase price edged lower to $456K, with an average loan amount of $358K in July as we move past the historically typical June pricing peak
• The average credit score among primary residence purchase locks hit a record high in the first week of July before edging modestly lower to remain flat in July
• Adjustable-rate mortgages (ARMs) fell to 6.79% of July's rate lock activity, as rates for such products became less competitive against fixed products

JACKSONVILLE, Fla., Aug. 14, 2023 /PRNewswire/ -- Today, Black Knight, Inc. (NYSE:BKI) announced the release of its latest Originations Market Monitor report, looking at mortgage origination data through July 2023 month-end. Leveraging daily rate lock data from Black Knight's Optimal Blue PPE, the Originations Market Monitor provides the industry's earliest and most comprehensive view of origination activity.

"While they moved around a bit in July, there was no escaping the fact that conforming 30-year rates topped 7% in July for the first time since they spiked last fall," said Andy Walden, vice president of enterprise research and strategy at Black Knight. "On both a practical and psychological level, that put further downward pressure on mortgage demand. Purchase loans continue to dominate the origination pipeline, but current housing market dynamics are just not conducive to boosting homebuyer origination volumes."

The month's pipeline data showed rate lock activity fell for the second consecutive month, dropping 7% overall. Purchase locks, which accounted for 88% of all July activity, fell 7.4% from June. Longer term, purchase lock counts are down 27% year over year and 35% off 2019 pre-pandemic, levels. Cash-out refinances also declined (-5.4%) and are hovering close to 60% below where they were in July 2022 when interest rates averaged in the mid- to high 5% range. Rate/term refis increased by a modest 1.9% in July, but remained down more than 31% year over year from an extremely low ceiling; July 2022 itself had marked a 93% year-over-year decline. Locks on such products will likely remain constrained for some time to come; just 3% of existing mortgage holders have first-lien rates at or above today's levels.

"With home prices hitting new peaks across many parts of the country, and no end in sight to the for-sale inventory shortage, the housing market continues to reheat," Walden continued. "It's worth noting, however, that – in a 'normal' year – June typically marks the calendar peak of home prices on a non-adjusted basis, so you would normally expect to see a decreasing trend through year's end and into February. That said, this year, and this market, have been anything but normal. Rising rates may be tamping demand for homes at such record high prices, as evidenced by rate lock activity, but they've still yet to overcome an even greater deficit of supply. As a result, the purchase market is in a stalemate."

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 July'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	Mitch Cohen
904.854.5043	704.890.8158
michelle.kersch@bkfs.com	mitch.cohen@bkfs.com

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SOURCE Black Knight, Inc.

FAQ

What is the significance of 30-year conforming rates crossing 7% for the first time since November 2022?

The increase in rates reflects the impact of market conditions on mortgage demand.

What percentage of lock volume did purchase lending account for?

Purchase lending accounted for 88% of lock volume.

What was the average purchase price and loan amount in July?

The average purchase price was $456K with an average loan amount of $358K in July.

What are the implications of the decline in purchase lock counts and cash-out refinances?

The decline suggests a potential slowdown in the housing market.

How did adjustable-rate mortgages (ARMs) perform in July's rate lock activity?

ARMs fell to 6.79% of July's rate lock activity.