Refi mortgage volume spikes in June

While purchase mortgage activity slumped in June, declining interest rates drove a whopping 39% month-to-month increase in rate and term refinance origination volume, a Optimal Blue Market Advantage report said 

Consumers who had higher than the current market mortgage rates were quick to take advantage of the situation.

"Many homeowners with higher rates — particularly those who closed on their mortgage in the last 12 to 18 months — jumped at the opportunity to refinance, even for a small reduction in monthly payments," said Brennan O'Connell, director of data solutions at Optimal Blue, in a press release. "This behavior speaks to the ongoing inventory and affordability challenges consumers are experiencing."

Rates for the 30-year fixed loan fell 6.86% on June 27 from 7.03% on May 30, according to the Freddie Mac Primary Mortgage Market Survey. It rose to 6.95% for July 3.

Optimal Blue's rate tracker from its product and pricing engine reached its low for the month on June 13 at 6.810% before ending the month at 6.938%. This was 8 basis points lower than the close of May.

The spike in rate and term refinances didn't change the fact that this area remains moribund for mortgage lenders.

Cash-out refi volume was up 11% but purchase volume was down 1%. This data was adjusted for fewer market days in June than in May.

Average loan amount declined by $300 to $374,200.

On an unadjusted basis, mortgage rate lock volume was down 12% in June compared with May. When the fewer market days was taken into account by Optimal Blue, lock volume was up 2%.

The primary source of the decline in the unadjusted data was a 14.9% drop in purchase lock activity compared with May, according to Optimal Blue's Market Volume Index. The annual decline was 14%.

Rate-and-term locks were up 19.8% month-to-month and 81.2% versus June 2023.

The cash-out product had 4.5% fewer locks compared with May, although this activity was flat with the same month last year.

For all forms of refis, market share rose to 16%, up from 13% the prior month.

Another source for rate lock data, Mortgage Capital Trading, found 7.84% lower activity versus May.

Conforming mortgage volume fell 130 basis points in June, compared with May to 55.9% from 57.2%, Optimal Blue said. The nonconforming share increased slightly to 13.5% from 13%, while Federal Housing Administration activity was unchanged at 18.4%. The Veterans Affairs share was up to 11.7% from 10.8%, while the U.S. Department of Agriculture program activity slipped to 0.5% from 0.6%.

Home purchase activity will determine how successful the rest of this year will be for mortgage originators.

"As we look toward the back half of 2024 and the potential for rate relief from the Fed, purchase lock counts will provide insight into if and when production will turn the corner," O'Connell said.