Rate lock volumes continued to surge throughout January, according to Black Knight’s Mortgage Origination Market Monitor. After nine months of declines, overall rate lock volumes increased 32 percent from December. Despite a modest rebound in purchase locks, the Jacksonville, Florida-based company noticed both rate/term and cash-out gains by months-end refinancing.
Mortgage rates for 30-year fixed-rate mortgages averaged 6.15 percent in January, down 36 basis points. In January, there was a 2.64 percent spread between 10-year Treasury rates and the 30-year fixed rate, a gap that has widened over the past year. There has been an increase of 173 basis points in the 10-year rate and a rise of 238 basis points in the 30-year fixed rate since last January.
Refinancing volumes increased due to declining interest rates, but they still represented only 15% of January’s activity, and both purchase and refinancing locks are lower than last year. There was a 44 percent decline in purchase locks from the prior January, while a 41 percent decline in refinancing. From a geographical standpoint, the 20 largest MSAs by lock volume all increased by double digits, with Chicago, Nashville, and Charlotte experiencing 50 percent increases over December.
The largest share of rate locks was found in conforming loans, at 58.4%. Of the loans, 18.5% were FHA and 12.4% were VA, while 10% were jumbo and expanded guideline loans. Lower rates pushed borrowers back toward fixed-rate mortgages in January, reducing the ARM share of lending to just above 8%.
A total of $340,000 was loaned on average, up from $336,000 a year earlier. The average purchase price increased to $421,000 from $419,000.
There has been a 4-point drop in credit scores among cash-out refinances and a 36-point drop in credit scores overall in the past year (down 9 points for rate/terms), and a 1-point rise in credit scores for purchase loans.
Purchase loan pull-through rates in January were 70 percent, markedly down from 85 percent in January 2020, before the pandemic began. Refinancing pull-through has now decreased to 50%.