Black Knight, Inc.’s Origination Market Monitor Report showed a sharp increase in 30-year mortgage interest rates over the first weeks of 2022.
The average rate recorded at the end of January 2022 was 3.77 percent, over 40 basis points to hit the highest point since March 2020.
“Amidst a backdrop of the Omicron variant, inflation concerns, Fed tapering and multiple rate hikes on the horizon, mortgage rates soared over the first weeks of 2022,” Optimal Blue, a division of Black Knight, President Scott Happ said in a release. “Still, despite this increase – and in some ways, because of it – lock activity improved in January for the first time in four months. Of course, rate/term refinance activity continued to fall, but strong growth in both purchase and cash-out refi locks helped drive a nearly 10 percent month-over-month jump in overall lock activity.”
Specifically, January’s data showed overall rate locks up 9.5 percent from December 2021 because of 19.9 percent and 9.2 percent increases in purchase loan and cash-out locks, respectively. In contrast, rate/term refinance activity fell for the fifth consecutive month, dropping another 16.5 percent to its lowest rate since May 2019. Year-over-year, it was an 80 percent decline.
As a result, the refinance share of the month’s origination mix fell to 43 percent, the lowest percentage of the market since July 2019. Non-conforming loan products, particularly jumbo loans, gained market share, growing from 9 percent this time last year to 16 percent of the origination market.
“With some $10 trillion in homeowner tappable equity in the market, it makes sense that we’d see cash-out refinance locks on the rise,” Happ said. “The significant jump in purchase originations can likely be attributed in part to typical pent-up, post-holiday demand. It could also represent skittish homebuyers hoping to lock in a still historically low rate being spurred to action by the quick acceleration in 30-year offerings over the opening weeks of the month.
“Of course, inventory constraints continue to serve as headwinds on purchase origination, as does homeowner affordability in the face of rising rates and home prices,” he added. “This bears out in the increase we’ve seen in the average loan amount, which rose yet another $6,400 in January to $347,300. The rate of those increases has been on the rise and trending higher in recent months as well, with January’s rise marking a 60 percent higher increase than December’s jump.”