Lower mortgage rates lead to increased lock-ins, including refinancing

January’s Mortgage rates continue to fall According to the Optimal Blue report, this means there is a significant increase in monthly lock-in activity for all three main reasons for lending, including cash withdrawals, interest rates and term refinancing.

The Originations Market Monitor report found that overall, rate lock-ins increased 36% from December and purchase volume increased 38%.

While refinancing activity remains near historic lows, borrowers seeking to draw equity from their properties increased lock-ins by nearly 30%, and rate and term refinancers increased lock-ins by nearly 20%.

However, total refinance activity accounted for only 17% of rate locks, down 140 basis points from December but up 503 basis points from October, Up 166 basis points from January 2023.

“December is traditionally the slowest month for mortgage lending due to the year-end holidays and cold weather,” Brennan O’Connell, director of data solutions at Optimal Blue, said in a statement. “December is traditionally the slowest month for mortgage lending,” said Brennan O’Connell, director of data solutions at Optimal Blue, in a statement. “It rises in January and will continue to rise into the summer.” “

On the buying front, Optimal Blue sees smallest annual declines in January Lockdown counts since May 2022“This could signal a stabilizing market and friendlier lending conditions in 2024,” its president, Kevin McMahon, said in a press release.

On the other hand, as O’Connell points out, “refinancing volumes are less dependent on seasonality and are primarily driven by interest rate movements.”

Compared to January 2023, rate lock volume was down 5.8%, purchase volume was down 7.7%, cash out refinances were down 12.2%, but rate and term refinances were up 39.6%.

The market volume index, the calculation Optimal Blue uses to measure interest rate lock activity, ended January at 77, the highest level since September and October, when the index also stood at 77.

Broken down by component, the MVI is 64 for purchases, 8 for cash-outs, and 6 for rate and term refinances.

One sign that mortgage rates were stable in January was the increase in consistent rate locks. Earlier last year, consumers were seeking government products with low down payments due to the interest rate environment.

In January, more than 57% of locks were qualified, 72 basis points higher than in December, while the rate of unqualified locks, which accounted for almost 10% of the total, rose 27 basis points.

FHA-insured loans accounted for 21%, down 87 basis points, while Veterans Affairs mortgages accounted for 12% of locked-in loans, down 13 basis points.

But to give that last number some context, in December, when overall lock activity fell 23%, VA rate lock volumes increased 137 basis points from November, which was attributed to existing product holders at that time seeking the agency’s Loans with reduced interest rates.

Even if rate lock activity improves, current market conditions remain difficult, Rates, affordability and inventory All restricted activities.

McMahon said this resulted in lockdown volumes still down more than 60% from the same period last year.

While the Freddie Mac Junior Mortgage Market Survey (which uses application data submitted to loan product advisors) has been stuck in the 10 basis point range since the week of December 21, Optimal Blue’s product and pricing engine tells a different story s story.

Data from Optimal Blue PPE noted that the 30-year Treasury note yield started in February just below 6.5%. But by February 9, the product had risen to just under 6.74%, more in line with 10-year Treasury yields over the same period.

“It will be interesting to see whether the rebound in lockdown activity is sustained as interest rates pick up in early February,” McMahon said.

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