Black Knight: Origination activity down for fourth straight month

Rate lock activity in December was down 18.3% from the previous month and 34.9% from December 2020, according to Black Knight’s latest Originations Market Monitor report.

The December drop marked four straight monthly declines in origination activity, with rate-lock movement responding to rising interest rates and the typical wintertime slowdown in home-purchase activities. The monthly decrease was driven by a 22.5% drop in purchase loan locks, although purchase locks were up slightly (1.5%) on a yearly basis.

“With the Federal Reserve speeding the tapering of its bond buying and indicating multiple rate hikes in 2022 to curb inflation, 30-year conforming rates sat above 3.3% for much of December,” said Scott Happ, Black Knight’s president of secondary marketing technologies. “Indeed, [Black Knight’s Optimal Blue Mortgage Market Indices] daily interest rate tracker showed average rates at year’s end within just two basis points of the 2021 high of 3.37%. Likely in response to those rising rates – and the seasonal slowdown in home purchases – we saw locks decline across all product types in December, with total volume down 35% year over year.”

On the refinance side, cash-out refi locks were down 9.7% monthly, although they were up 17.6% year over year as homeowners took advantage of soaring home prices that pushed equity to banner highs. Rate-and-term refi locks, on the other hand, were down 17.1% monthly and fell to their lowest level in two years.

“Seen in the light of the normal seasonal slowdown in home sales as well as our current rate environment, December’s more than 20% drop in purchase loan locks isn’t all that surprising,” Happ said. “Neither was the continued decline in rate-and-term refinance lending, though the size of the annual decline is noteworthy, if not sobering.”

Still, with purchase lock volume plunging month over month, the refinance share of all December origination activity grew to 48%. Average credit scores for refi applicants were down 20 points year over year as high-credit borrowers have historically sat out during periods of rising interest rates.


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