While rates were still high in December 2022, the Mortgage Monitor Report published by Black Knight’s Data and Analytics division showed a decline of 19.4% in rate lock volumes despite seasonal downturns.

In the five years that Optimal Blue has been tracking rate lock volumes, Kevin McMahon, President of Black Knight’s Optimal Blue division, says volume has dropped to its lowest level ever. The decline is driven by a 20.5% purchase lock drop. As well as seasonality, affordability pressures are also significant factors.

A double-digit decline was also observed in refinance activity, with cash-out refinances and rate/term refinances falling 87% and 93%, respectively, from last year.

As the Fed doubled down on its stance of additional tightening in 2023, mortgage rates declined through the first half of December before rising again. Still up 81 basis points for the year but 40 basis points off the recent high, the spread between mortgage rates and the 10-year Treasury yield narrowed another basis point of 22 to a basis point of 264 during the month.

The fewest purchase locks in a single month since early 2014 were recorded in December according to Black Knight’s McDash mortgage performance data. In addition, the month has seen the fewest rate locks on record since Black Knight began reporting origination metrics in January 2000, according to McMahon. For the fourth consecutive month, mortgage holders locked in a new record-low rate to refinance their existing mortgages.

There was a drop of 20.5% in purchase locks, an 11.2% drop in rate/term refinances, and a 14.1% drop in cash-out refinances compared to the previous month, with refinance locks being 16% of the overall activity for the month.

A year-over-year decline of 47% in purchase lock counts was accompanied by a 70% decline in total lock counts.