Mortgage lock volume rises for first time in nine months

January's mortgage rate lock activity increased nearly 32% from December, the first increase in nine months, as interest rates continued to inch back down from their November high point, Black Knight said.

However, volume was down 62% compared with January 2022, and should remain lower on an annual basis for the foreseeable future as the conforming mortgage interest rate is still 238 basis points higher than 12 months prior, according to Black Knight's latest Originations Market Monitor. The data comes from its Optimal Blue product and pricing engine.

Potential homebuyers are still dealing with elevated — albeit declining prices — and the long-term shortage of properties for sale.

Also, an increase in activity between December and January would not be out of the norm.

"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," said Kevin McMahon, president of Optimal Blue, a division of Black Knight, in a press release. "With rates picking back up in early February, it will be interesting to see whether the rebound in lock activity will hold."

Locks were up significantly across all loan purposes, but refinancings remain a paltry 15% share of the market, a decline of a full percentage point from December.

Black Knight's Market Volume Index — the measurement of rate lock activity indexed to 100 for January 2018 — increased to 82 from 62 in December. The purchase component of the index made up 69 points, up 32.2% from the prior month, but down 43.7% compared to one year ago.

A recent study from Black Knight noted that to offset higher interest rates, 57% of purchase mortgage borrowers took a permanent buydown in the third week of January.

The cash-out refi segment rose 25% from December, to 9; this was down 85.1% compared with January 2022.

Rate-and-term refi volume increased 37%, but remained the tiniest segment with a 4 MVI. This was down by 88.1% on a year-over-year basis.

The average credit score for cash-out refis fell 4 points from December and 36 points from January 2022 to 687. Purchase mortgage average credit scores rose 1 point month-to-month to 729, while for rate-and-term refis fell 9 points to 723.

Meanwhile, nonconforming mortgages were the only product type to see a month-to-month drop in activity for January, down a rather large 256 basis points from December and 652 basis points from the same month in 2022. These loans were 9.7% of the market and their volume likely suffered from the Jan. 1 increase in the single-family conforming mortgage loan limit to $726,000 and $1.1 million in high-cost areas.

That 12% increase pushed over 2 million homes from the jumbo market into being eligible for conforming loans, a Zillow study done in January found.

In January, conforming mortgages had a 58.5% market share, up 55 basis points from December but down 563 basis points in January 2022.

Federal Housing Administration loans contributed 18.5% to January's activity, up by 31 basis points compared with one month prior and 782 basis points from one year prior.

The U.S. Department of Agriculture mortgage guarantee program recorded a 0.9% share of January's locks, up 12 basis points from December and 16 basis points from January 2022.