BAM Key Details:

  • Black Knight released its latest Originations Market Monitor Report, showing a 32% increase in rate lock volumes in January 2023, ending a 9-month streak of declines.
  • Purchase rate locks, as well as both rate/term and cash-out refi volumes increased, with refi locks accounting for 15% of the month’s total activity. 

On February 13th, Black Knight, Inc. announced the release of its Originations Market Monitor report for January 2023, based on mortgage origination data through the end of the month. 

Black Knight Optimal Blue PPE—the most widely used product, pricing and eligibility engine in the mortgage lending industry—provided the daily rate lock data leveraged for the report to provide the earliest and most accurate and comprehensive picture of origination activity. 

January’s report shows a 32% increase in rate lock volumes, driven by falling mortgage rates and seasonal activity, ending a nine-month streak of declines. 

Here’s what you need to know. 

Behind the 32% increase in rate lock volumes

According to Optimal Blue Mortgage Market Indices from Black Knight, 30-year rates dropped 36 basis points to 6.16% in January, continuing a decline that started last November. 

Consumer confidence was noticeably higher in January, with agents across the country reporting an increase in buyer activity compared to December 2022. 

With the increase in home prices, the average mortgage loan amount increased from $336K to $340K, while the average home purchase price rose from $419K to $421K. 

Credit scores dropped four points for cash-out refis—bringing those scores down a total of 36 points over the past 12 months—and dropped nine points for rate/terms. For purchase transactions, they remained relatively stable (+1 point). 

As a percentage of total loan volumes, nonconforming loans (including jumbos and loans with expanded guidelines) fell to just under 10%, while conforming (58.5%), FHA (18.5%) and VA (12.4%) loans all increased their shares.

The ARM share of mortgage lending declined further in January to just over 8% of total rate locks as lower mortgage rates swayed borrowers toward fixed-rate loans.

Mortgage rates declined in January, continuing a trend that began in early November 2022. Conforming rates dropped 36 basis points from where they were at the start of the year, and we saw that rates associated with those FHA/VA/jumbo locks all came down in kind. Triggered by this pullback, rate lock volumes rose for the first time since March 2022, driven by declining interest rates and seasonal tailwinds, snapping a nine-month streak of declines.

Kevin McMahon

President of Optimal Blue, a division of Black Knight

Black Knight’s report highlighted increases in rate lock volumes seen across the board: 

  • Purchase mortgages: +32% month-over-month
  • Rate/term: +37%
  • Cash-out refis: +25%
  • Overall: +32%

Refinance locks (including cash-outs) made up 15% of January’s rate lock activity—still historically low, indicating the very small degree of refinance incentive, especially with so many homeowners locked in at rates around 3%. 

On the upside, the largest 20 metropolitan statistical areas (MSAs) all experienced double-digit growth in rate lock volumes, with Chicago, Nashville, and Charlotte reporting 50% month-over-month gains from December. 

Rate lock volumes are still down more than 60%

Despite the encouraging growth, affordability challenges persist and continue to hamper purchase lending (as well as refi opportunities). 

The dollar volume of these rate locks is down 44% year-over-year and down 14% compared to January 2020. Purchase rate lock counts, excluding the impact of home price changes, fell 41% year-over-year. 

While this month’s Originations Market Monitor certainly brings welcome news, it’s important to remember that we would have expected to see a seasonal rebound in January, regardless. Mortgage originations continue to face significant rate, affordability and inventory headwinds, and lock volumes are still down more than 60% from the comparable period last year. With rates picking back up in early February, it will be interesting to see whether the rebound in lock activity will hold.

Kevin McMahon

President of Optimal Blue, a division of Black Knight

The Black Knight Originations Market Monitor tracks high-level loan origination metrics for the U.S. and the top 20 metros by share of total origination volume, providing comprehensive reports on a monthly basis. 

For more details on January’s origination activity, see the full Black Knight Originations Market Monitor Report.

Top takeaways for real estate agents

Make it a priority to stay up-to-date on any impactful changes in the market so you can be a reliable voice in your area for anyone thinking of buying or selling this year. 

Be prepared to address each one’s pain points, so they know you understand where they’re coming from, and they can trust you to focus on getting the best possible outcome for them—even if that means they have to wait a bit longer and make some changes to improve their financial situation. 

Serving each potential client is a long game. You probably won’t get a “yes” the first time you ask. So, focus on giving them a reason to see you as an ally.