Black Knight Originations Market Monitor: Rate Locks Hit Record Low For Second Consecutive Month; Rate and Affordability Pressures Amplify Seasonal Downturn

Rhea-AI Summary

Black Knight, Inc. (NYSE:BKI) reported a significant decline in rate lock volumes for December 2022, with an overall decrease of 19.4% month-over-month. Purchase locks fell by 20.5%, while refinancing activity also decreased, with cash-out refinances down 87% and rate/term refinances down 93% compared to December 2021. This decline in mortgage activity is attributed to high rates and affordability issues, with purchase locks hitting their lowest monthly total since early 2014. The report highlights ongoing challenges in the mortgage market as rate lock counts plummeted almost 70% year-over-year.

Positive

• Overall rate lock dollar volume down 19.4% month-over-month indicates strong market activity despite declines.
• Data provides insights into market trends, helping stakeholders make informed decisions.

Negative

• Significant drop in purchase locks by 20.5%, reflecting ongoing pressure in the mortgage market.
• Refinance activity at record lows, with cash-out refinances down 87% and rate/term refinances down 93% from December 2021.
• Total rate lock counts decreased nearly 70% year-over-year, suggesting severe market contraction.

• Rate lock volumes declined by 19.4% in December as elevated mortgage rates kept buyers, sellers and refi candidates on the sidelines
• Purchase locks fell 20.5%, while rate/term refis dropped 11.2% and cash-out refis were down 14.1%, with total refinance locks making up 16% of the month's overall activity
• Optimal Blue Mortgage Market Indices from Black Knight showed 30-year rates dipping below 6.25% in mid-December before reversing course to finish the month at 6.52%, roughly even with the previous month
• Seasonal headwinds combined with interest rate and affordability pressures continue to challenge purchase lending, with the dollar volume of such locks down 45.9% over the past three months and down 48.9% from December 2021
• Purchase lock counts – which exclude the impact of home price changes – were down 47% year-over-year with total rate lock counts down nearly 70% over that same span
• Using Black Knight's McDash mortgage performance data to provide comparative history, that represents the fewest purchase locks in a single month since early 2014, and fewest overall rate locks on record dating back to January 2000 when Black Knight began reporting origination metrics
• The number of mortgage holders locking in a rate to refinance hit a record low for the fourth consecutive month in December, and is now more than 50% below the previous record low set back in July 2000
• Credit scores for cash-out refinances rose 5 points to 691 (down 34 points over the past 12 months) and fell 4 points for rate/term refinances but remained unchanged for purchase transactions

JACKSONVILLE, Fla., Jan. 9, 2023 /PRNewswire/ -- Today, Black Knight, Inc. (NYSE:BKI) announced the release of its latest Originations Market Monitor report, looking at mortgage origination data through December 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.

"Mortgage rates declined through the first half of December but reversed course as the Fed doubled down on their stance of additional tightening in 2023," said Kevin McMahon, president of Optimal Blue, a division of Black Knight. "The spread between mortgage rates and the 10-year Treasury yield narrowed another 22 basis points during the month to 264 basis points, which is 40 basis points off the recent high, but is still up 81 basis points for the year."

The month's pipeline data showed overall rate lock dollar volume down 19.4% month over month, the lowest level in the five years Optimal Blue has been tracking the metric. The decline was driven by a 20.5% drop in purchase locks, reflecting the strong impact of seasonality and affordability pressures. Refinance activity continued to fall by double digits, with cash-outs now down 87% and rate/term refinances down 93% from December 2021. Combined, refinance activity made up 16% of the month's lock activity.

When excluding the impact of record home price changes on volumes by looking at the raw number of lock counts, the data shows the number of purchase locks in December down 47% year-over-year and down 33% compared to pre-pandemic levels in 2019, with overall rate lock counts down nearly 70% from last year's levels.

"Using Black Knight's McDash mortgage performance data to provide comparative history, December saw the fewest purchase locks in a single month since early 2014, and the fewest overall rate locks on record dating back to January 2000 when Black Knight began reporting origination metrics," McMahon continued. "The number of mortgage holders locking in a rate to refinance their existing mortgage also set a new record low for the fourth consecutive month."

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 December'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 were the rate lock volumes reported by Black Knight in December 2022?

In December 2022, Black Knight reported a 19.4% decline in overall rate lock volumes.

How much did purchase locks fall in December 2022 for Black Knight?

Purchase locks fell by 20.5% in December 2022.

What is the status of refinancing activity as reported by Black Knight?

Refinancing activity decreased significantly, with cash-out refinances down 87% and rate/term refinances down 93% compared to December 2021.

When was the last time purchase locks were this low according to Black Knight?

December 2022 saw the fewest purchase locks in a single month since early 2014.

Is the mortgage market currently facing any challenges?

Yes, the mortgage market is under pressure due to high rates and affordability issues, leading to a significant decline in overall activity.