April Sees A Decline In Lock Activity Despite Lower Mortgage Rates

Mortgage News May 18, 2023

According to Black Knight, mortgage rate-lock volumes experienced a decline of 22% in April compared to the previous month. This drop can be attributed to a combination of cautious homebuyers and limited housing inventory, creating a challenging situation for the market.

Based on the Originations Market Monitor Report by the real estate analytics company, it was found that there was a decrease in purchase loan locks by 22%, cash-out locks by 21%, and rate-and-term refi locks by 28% compared to February. In April, purchase locks accounted for over 87% of all rate-lock activity, which is the highest percentage ever reported by Black Knight. This surge in purchase locks can be attributed to the ongoing high-interest rate environment, which discouraged refinancing. However, it’s important to note that purchase lock counts were significantly lower compared to the previous year, with a decline of 45% annually and 38% from April 2019, before the impact of the COVID-19 pandemic.

Andy Walden, the Vice President of Enterprise Research and Strategy at Black Knight, observed that purchase locks had made significant progress in recovering from the impact of the pandemic. With the help of lower mortgage rates, purchase locks were able to reach nearly 15% of their pre-pandemic levels twice this year, once in January and again in March. However, the latest data shows that the gap has once again widened to 30%, indicating a setback in the recovery of purchase locks.

Even after accounting for the variation in business days between March and April, there was still a 10% decrease in lock volumes during the latter month. This decline occurred despite the fact that the average 30-year conforming mortgage rates in April were 6.45%, which is 17 basis points lower compared to the previous month.

According to Walden, the decrease in rate locks could be attributed to the declining mortgage rates. As rates continue to drop, prospective borrowers may experience a psychological effect that leads them to hold back in anticipation of further rate reductions.

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