Cash-out refis up more than 41% in the last 3 months

With interest rates remaining low and home prices on the rise, the amount of cash-out refis has shot up 41% over the last three months, according to Black Knight.

Due to the 7.6% increase month-over-month, cash-out refis drove refinances to make up a slim majority share of all originations in August, at 51%. It was the first time since February that refinances made up a majority share of mortgage originations.

"We've now seen cash-out activity increase for three consecutive months, and with $173,000 in equity available to the average homeowner with a mortgage and home prices still climbing, there is still room in the market for growth,” Scott Happ, Black Knight’s president of secondary marketing technologies wrote in the company’s Originations Market Monitor Report. “With equity levels at record highs and interest rates broadly expected to tick upward in coming years, cash-out lending is likely to play a much larger part in the overall refinance market."

Total rate locks grew 1.3% in August from July, 11% from three months earlier while activity fell 19.3% year-over-year. Cash-out refis were up 28.9% from the same period in 2020.

Rate and term refis inched up 0.5% from July, but dropped 50.6% from August 2020. Meanwhile, purchase volume dipped 0.8% monthly, 2.6% quarterly and rose 2.2% from a year ago.

Of the 20 largest metropolitan areas by origination volume in August, 11 had majority refi volumes, six skewed toward purchase and three had even splits. California led the way in refi shares, with 64% in Los Angeles, 63% in San Diego, 62% in both Riverside and Sacramento, and 60% in San Francisco.

Houston had the largest concentration of purchase locks at 60%, trailed by 54% in Minneapolis, and 53% in both Miami and Austin, Texas. All in all, Los Angeles held the largest market share with 5.2% of lock volume, followed by 4.1% in Washington, D.C., 4% in New York, 3.4% in Chicago and 3.1% in Phoenix.