Home buyer loan locks jump amid decade-high rate hikes

Purchase mortgage loan locks shot up in March, suggesting homebuyers are racing ahead of the sharpest rate hikes in over a decade, Black Knight reports.

Overall rate lock activity jumped 19.1% in March as the average 30-year conforming rate touched 4.93% before closing out the month at 4.79%, according to Black Knight’s March Originations Market Monitor.

“Despite seeing the fastest one-month rise in rates in nearly 13 years, we saw purchase lock volumes increase by 31% from February – likely as prospective buyers moved to lock in their loans before rates climbed any higher,’ said Scott Happ, Black Knight secondary marketing technologies president, in a press release.

Over the past three months, purchase loan locks are up 70%, the report said. Meanwhile, refinances continue to tumble and accounted for 28% of market activity in March, the lowest share since November 2018. In particular, rate and term refis have spiraled downward, with volume dipping 15.4% in March and is now 81% lower than the same time last year.

Cash-out refi locks rose 1.6% last month, with this less rate sensitive product showing signs of life as borrowers took advantage of boosted equity levels from record home price gains, Black Knight said. Home prices were up nearly 20% in February year-over-year, compounded by a tight housing supply not expected to return to pre-pandemic levels until 2024.

The combination of factors pushed the average home loan balance up $8,000 to just under $361,000 in March, according to the report. The market conditions have opened the door for nonconforming loans, as lenders small and large are expanding their offerings for homebuyers emerging from the coronavirus pandemic in various financial situations. Non-qualified mortgage products accounted for 18% of lock activity in March, part of a slow and steady increase since the onset of the pandemic.

Conforming loans made up 60.9% of the market share of loans in March, a nearly 7% decline in the past year, Black Knight said. Veterans Affairs and USDA loans have remained flat over the last 12 months, sitting at 8.8% and 0.7% of the market share, respectively. Federal Housing Administration loans have ticked up slightly in the past year, totaling 11.7% of the market share in March.