With rising interest rates reaching their highest point since midsummer, November saw a 25% month-over-month decrease in mortgage lock volume, according to Optimal Blue’s latest Market Advantage report.
Purchase locks were down 21% from October, and purchase lock counts were down 21% monthly and 3% annually, snapping a two-month streak of yearly lock count growth. Refinance volumes saw significant drops: 20% for cash-out refinances and 50% for rate-and-term refinances.
Despite these declines, the year-over-year data shows positive trends. Total lock volume increased by 12% from November 2023, with purchase volume up 5%, cash-outs up 35% and rate-and-term refis rising by 95%. This growth offers some optimism for the market as it continues to face high-interest rate headwinds moving forward.
Rates were elevated throughout November but showed slight improvement ahead of the Thanksgiving holiday. The Optimal Blue Mortgage Market Indices (OBMMI) 30-year conforming fixed rate index ended the month at 6.68%, 11 basis points lower than October. FHA and VA rates also saw minor decreases, while the 30-year jumbo rate inched up by 16 bps to close at 6.98%.
The shift in loan product mix highlights affordability challenges. FHA loans, which require smaller down payments and more lenient credit requirements, gained market share, representing 20% of total production in November. This marks a return to near the peak levels seen in 2023. VA loans saw a slight dip, though their share is up 11% year-over-year. Overall, government-backed loans accounted for nearly a third of loan volume.
“The rising percentage of FHA loans indicates affordability continues to be a concern among homebuyers as we move into year-end,” noted Brennan O’Connell, director of data solutions at Optimal Blue. “In spite of the recent dip in purchase and refinance activity, we see the [year-over-year] improvements in purchase volume, cash-out and rate-and-term refinances as a bright spot.”
Additional findings include a drop in average loan amounts and home prices, with the average loan amount falling from $380,100 to $376,400, and average home prices dipping from $482,400 to $477,400.
