HousingWire

Origination faced downward pressure when rates reached 6.8% in early March, but quickly surged when rates dropped to 6.4%

Rate lock volume jumped 43% in March on the back of seasonal tailwinds, falling interest rates and stronger purchase market performance.

Lock volumes increased across the board, led by purchase locks jumping 44% in March — well above the 30% average February to March gain seen across the past 5 years, Black Knight’s originations market monitor report showed.

While purchase locks showed significant improvement month over month, the volume is 40% down compared to March 2022. 

Cash-out refis were up 31% in March from the previous month, and even rate/terms – which have been all but nonexistent lately – grew by 36%. Compared to the same period last year, cash-out refis were down 80% and rate/term refis declined 71%. 

“This continues to be an incredibly rate-sensitive housing market, and March’s rate lock activity perfectly illustrates this dynamic,” Andy Walden, vice president of enterprise research at Black Knight, said. 

In early March, when mortgage rates started their climb back toward 7%, originations faced pronounced downward pressure. 

However, when investors flocked to safe-haven assets in the wake of uncertainty in the banking sectors — which led to rates coming down roughly a quarter of a point — the mortgage industry saw another quick surge in originations, particularly the purchase market, Walden noted. 

The 30-year fixed mortgage rate climbed to the highest levels of the year in early March, reaching 6.8% before dropping to 6.4% by the end of the month, Black Knight’s Optimal Blue mortgage market indices showed. 

The disproportionate surge in purchase lending pushed the refi share of the market mix down to a current cycle low of just 13%. The ARM share of the month’s activity fell to less than 9% as borrowers took advantage of falling rates and shifted toward fixed-rate products.

The Federal Housing Administration (FHA) loan share increased to more than 20% of the pipeline in March, up from 18% at the start of the year and 12% from a year ago. 

“A cooling market lacking the multiple bids and all-cash offers of the recent past has made sellers more receptive to FHA offers. That, combined with a recent reduction in FHA mortgage insurance premiums and a mid-month increase in the FHA-to-conforming spread, made FHA loans comparatively more attractive,” Walden said. 

In a widely anticipated move, the FHA announced a 30 basis point reduction in the annual premium charged to mortgage brokers in February. Most borrowers are expected to see mortgage insurance premiums (MIPs) reduce to 55 bps from 85.

With the cut, housing costs will reduce by an average of $800 for roughly 850,000 homebuyers and homeowners in 2023, the White House said following the FHA’s announcement.