Mortgage production declines 11% as rising-rate woes continue

“However, when we look at purchase lock counts to exclude the impact of soaring home values on volume, we see the number of purchase mortgages is off some 21% from last year’s levels,” Happ noted.

Government-backed loans gained market share in June as FHA and VA lock activity continued to increase at the expense of agency volumes. This trend was likely reflected in the further drop in the average loan amount – down from $359,000 to $351,000. The average borrower credit score in June was 723, with scores on cash-out refis nosediving to 693, the lowest point Optimal Blue has recorded since it started tracking the metric in 2013.

“The month’s data illustrates just how interest rate-dependent the originations market has become,” Happ said. “With 30-year rates hovering below 6% – still historically low – we’ve seen the rate/term refi market dwindle to next to nothing, with increasing downward pressure on cash-out activity. Purchase volumes are driving 82% of all origination activity, and those volumes are on the decline as well – in the heart of the traditional homebuying season.

“Eventually, equilibrium will return; but, as of June, the market seems to be having trouble adjusting to a rate environment anywhere above the historically low levels reached during the pandemic,” he added.