Despite lower mortgage rates, lock activity drops in April

Black Knight VP: Buyers could be holding off in hopes of lower rates

Mortgage rate-lock volumes dipped in April, falling 22% month over month as the market faced a double whammy of hesitant homebuyers and still-short supply, according to Black Knight.

The real estate analytics company’s Originations Market Monitor Report revealed that purchase loan locks were down 22%, cash-out locks were down 21%, and rate-and-term refi locks were down 28% from February. Purchase locks comprised more than 87% of all rate-lock activity in April — the highest share ever recorded by Black Knight — as the elevated rate environment continued to discourage refinance activity. Still, purchase lock counts were down 45% annually and 38% from April 2019, before the COVID-19 pandemic started.

After moderating mortgage rates helped purchase locks approach 15% of their pre-pandemic level twice this year (once in January and again in March), the gap has now widened again to 30%, noted Andy Walden, Black Knight’s vice president of enterprise research and strategy.

“Despite the fact that mortgage rates on average were lower in April, rate lock volumes took a hit,” Walden said. “From March to April, volumes were down 22%, even though the average rate in April was 17 basis points lower than that of March. While half the decline can be explained by the fact that there were three fewer business days in April than in March, we clearly saw additional cooling in rate-lock volumes this month.”

Adjusting for the difference in business days between March and April, the latter month’s lock volumes still dropped 10%. The decline came even as 30-year conforming mortgage rates averaged 6.45% in April, some 17 basis points lower than the month prior.

Walden said that the declining rates may actually have something to do with the pullback in rate locks. With rates on the downslope, there’s a psychological effect on prospective borrowers, who may hold back in hopes that they decrease further.

“We saw a similar phenomenon on the rate dips in March,” Walden said. “Inventory challenges are surely playing a role as well. New listing volumes remain well below pre-pandemic levels and active for-sale inventory fell for the sixth consecutive month on a seasonally adjusted basis. Lock volumes will be worth watching closely in coming weeks to see if this trend continues.”


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