January rate-locks paint encouraging picture with 36% bounce

Latest data from Optimal Blue may foreshadow 'friendlier lending environment'

According to Optimal Blue’s latest Originations Market Monitor Report, 2024 started off on an encouraging note, with January seeing a 36% gain in total mortgage-rate lock volume.

Optimal Blue attributed the surge in rate locks, which included a seasonal 38% uptick in purchase lock volume, to the ongoing trend of interest rate relief. Mortgage rates fell from 7.22% in the week ending Nov. 30 to 6.63% in the week ending Feb. 1, per Freddie Mac’s interest rate tracker, spurring more would-be homebuyers to leave the sidelines and lock in a rate for a home loan.

“We also saw the smallest year-over-year decline in purchase lock counts since May 2022, which may foreshadow a stabilizing market and friendlier lending environment in 2024,” said Brennan O’Connell, Optimal Blue’s director of data solutions.

Refinance activity saw a monthly bounce as well, with locks for cash-outs and rate-and-term refis increasing 30% and 20%, respectively.

All 20 of the nation’s largest metropolitan statistical areas saw a notable increase in rate-lock volume. Las Vegas saw the most prominent surge, with locks vaulting 90.8%.

The growth in rate-lock activity was concurrent with an increase in average credit scores across all loan purposes and products in January. The average credit score for a purchase loan was 736 in January, up three points month over month. Credit scores for rate-and-term refinances and cash-out refis were 726 and 692, respectively; that’s up 2 points on both counts from credit scores in December.

Average purchase prices increased as well, up from $435,900 in December to $444,900 in January, halting a six-month skid. Consequently, average loan amounts rose as well, up from $349,500 to $355,600 month over month.

Optimal Blue’s data also revealed that conforming loan products gained market share to start the year, growing to 57.3% of total volume, an increase of 72 basis points. Non-conforming products, including jumbo and non-QM loans, also saw higher share, climbing 27 basis points to reach 9.7% of total volume. Government loans saw the needle move the other way, with FHA share falling 87 bps to 20.7% of total volume and VA share falling 13 bps to 11.7%.


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