Purchase loans are claiming a larger share of the origination pipeline as refinance opportunities diminish, reaching a record high of 88.4% in June, according to Black Knight’s market monitor report. This represents a 31% decrease year over year and a 29% drop compared to pre-pandemic levels in 2019, indicating that nearly 90% of newly originated mortgages are purchase loans.
In May, rate lock activity decreased by 1% compared to the previous month. Conforming loans gained market share while non-conforming loan products declined. The 30-year mortgage rate rose by 6 basis points (bps) to 6.78%.
Purchase lock volumes dropped by 11% since March and were 31% lower than the same month in 2022. Cashout refinances fell by 16% in the past three months and were 63% below last year’s levels. Rate/term refinances decreased by 32% in the three-month period and 44% compared to the same month in 2022. The refinance share of lock volume reached a new low at 11.6%.
The average purchase price continued its seven-month growth, reaching $457,000, while the average loan amount remained steady at $360,000. ARM loan demand slightly declined to 7.38% of total locks. Jumbo rates increased more than conforming rates, resulting in a reduced share of nonconforming locks (including jumbo and expanded guidelines) in the pipeline.
Different markets had varying levels of refinance activity. Houston and Minneapolis metros had the lowest percentage of refi locks at 6%, while Los Angeles had the highest at 20%. Atlanta, Miami, Riverside-San Bernardino, and San Francisco-Oakland also had higher refinance rates than the national average.
Credit scores for conforming, FHA, and VA borrowers slightly improved, indicating a potential tightening of credit standards in an uncertain economy.
The market’s high level of economic uncertainty resulted in notably wide gaps between 10-year Treasury yields and 30-year mortgage rates. This uncertainty appears to have influenced the tightening of credit standards across different loan categories.
In April, the purchase pull-through rate, as found by Black Knight researchers, rose by 94 basis points from March, reaching 77.7%. However, the refinance pull-through rate experienced a significant decline of 402 basis points from March, falling to 61.9%.