September 2022 Originations Market Monitor
Cash-Outs Plunge in September; Purchase Locks Decline on Higher Rates, Record-Low Affordability
- Optimal Blue’s Mortgage Market Indices tracked 30-year rates as they rose 91 basis points overall in September to finish the month at 6.72%, the highest level in more than 15 years
- Overall lock volumes were down nearly 10% from August, 30% down in the last three months and almost 60% off last year’s levels
- Refinances continued their decline, accounting for just 16% of the month’s lock volume, with cash-outs making up almost three-quarters of all refinance activity
- However, cash-out locks – which had shown some resilience even as interest rates began to rise – dropped significantly as well, falling 26.2% from August, and are now down 78% from last year
- Rate/term locks – which had been falling precipitously in recent months – appeared to hit a floor, holding steady (-0.1%); 93.3% below the same month in the previous year
- This aligns with Black Knight data that shows roughly 90% of all active first-lien mortgages have rates below 5%, with the population of refinance candidates at an all-time low
- Purchase lending – while making up the vast majority of September activity – fell as well, with volumes down 7.6% from August and 29.4% from last year
- Using purchase lock counts – as opposed to dollar volume – to exclude the impact of record-breaking home price growth, the number of loans locked remains 10.2% below 2019’s pre-pandemic level
JACKSONVILLE, Fla. – Oct. 10, 2022 – Today, Black Knight, Inc. (NYSE:BKI) announced the release of its latest Originations Market Monitor report, looking at mortgage origination data through August month-end. Leveraging daily rate lock data from the 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.
“Interest rate and affordability challenges have fundamentally changed the mortgage origination market for the remainder of 2022 – and the foreseeable future,” said Scott Happ, president of Optimal Blue, a division of Black Knight. “Interest rates are now at their highest level in 15 years, while affordability is at 37-year lows. Given these realities, it’s not particularly surprising that rate locks are falling sharply. Keep in mind, however, that all this is coinciding with the already traditionally slower purchasing months.”
The month’s pipeline data showed overall rate lock dollar volume down 9.9% month over month and at the lowest level since December 2019. The decline was broad-based but largely driven by a 26.2% decline in cash-out refinance locks. With tappable equity near all-time highs, cash-outs had shown some early resilience even as rates began to rise. They’re now down 78.2% from September 2021. In contrast, rate/term refinance activity appeared to have found a floor, holding steady at -0.1% from August, down 93.3% year over year. This aligns with Black Knight data that shows roughly 90% of all active first-lien mortgages have current rates below 5%, putting the population of rate/term refinance candidates at an all-time low. As a result, the refi share of the market hit a new low of 16% in September.
“Interest rates jumped almost a full percentage point in September, with affordability headwinds already high,” Happ continued. “Home prices are pulling back in a growing number of markets, but across the country, affordability remains a challenge. This is likely one reason why non-conforming loans gained market share and we saw an increase of the average loan amount. The decline in purchase lock volumes bears this out as well. Purchase lock counts – which exclude the impact of soaring home values on dollar volume – show we’re down more than 10% from 2019 levels, marking the third consecutive month that the number of purchase locks has fallen below pre-pandemic norms.”
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.
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.
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