Mortgage rates ticked up again in February after a brief respite, showing once again just how rate-sensitive the market continues to be, according to the latest Originations Market Monitor report from Black Knight.
“Conforming rates dipped below 6% early in the month but finished it up 52 basis points from January. Even though the number of rate locks was down month over month, dollar volume increased due to a rate environment that favored jumbo and ARM loans over GSE products,” said Kevin McMahon, president of Optimal Blue, a division of Black Knight. “Essentially, though, the story remains the same – one of a market facing significant interest rate-driven headwinds. As Black Knight reported last week in our latest Mortgage Monitor, there were clear signs of buy-side demand when rates neared 6% – it just quickly pulled back when rates began to climb again.”
The month’s pipeline data showed overall rate lock dollar volume up 2% over January, with purchase locks rising 4% while cash-out refinances fell 11% and rate/term refinances remained near historic lows. Combined, refinance locks made up just 14% of the month’s activity, returning to the low point in this cycle, first reached in October. Five of the largest 20 MSAs by lock volume saw pullbacks, with former hotspot Austin experiencing a double-digit decline month over month.
“As rates resumed their upward trajectory in February, borrowers responded predictably, moving toward more rate-favorable offerings,” McMahon continued. “That included a shift to jumbos, ARMs and other nonconforming products in the month. With refinance activity basically at a floor, all eyes are on the purchase market. And yet such lock volumes remain more than 40% down from last year’s level, with the triple-threat of rate, affordability, and inventory challenges still looming large for the foreseeable future.”
Click here to read the full Originations Market Monitor report from Black Knight.
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