Mortgage origination outlook brightens in March

The beginning of spring marked a reawakened housing market. After months of tempered housing activity, rate lock dollar volumes swelled in March, increasing 43% month-over-month, according to a report published by data vendor Black Knight Monday.

Last month saw purchase locks increase by 44%, jumping past the 30% growth seen between January and February. Meanwhile cash-out refinances rose 31% and rate-and-term refis were up 36%, the data vendor's report found.

The increase in rate lock activity was driven by seasonal tailwinds and turmoil in the banking sector, which put downward pressure on interest rates.

"This continues to be an incredibly rate-sensitive housing market, and March's rate lock activity perfectly illustrates this dynamic," said Andy Walden, vice president of enterprise research at Black Knight. "In the wake of uncertainty in the banking sector and investors' flight to the safe haven of U.S. Treasuries, rates came down roughly a quarter of a point. The result? Another quick surge in originations, particularly in the purchase market."

Interestingly, the lock volume of Federal Housing Administration loans saw notable growth last month. FHA loans made up a 20% share of the overall market in March, up from 18% at the beginning of the year and 12% a year earlier, Black Knight's report said. This increase comes on the heels of the administration slashing premiums by 30 basis points in February.

"A cooling market lacking the multiple bids and all-cash offers of the recent past has made sellers more receptive to FHA offers," Walden said. "That, combined with a recent reduction in FHA mortgage insurance premiums and a mid-month increase in the FHA-to-conforming spread, made FHA loans comparatively more attractive."

Perspectives on the housing market were also slightly sunnier in Fannie Mae's Home Purchase Sentiment Index, which grew in March by 3.3 points to 63.1.Per the survey, consumers are starting to change their minds about whether it's a bad time to sell a home, with 40% of consumers believing so, down from 44% last month. Twenty-one percent expressed concern about losing their job in the next 12 months, down from 24% last month.

Despite the HPSI showing signs of increasing, it remains "only slightly above its all-time low set late last year," the government-sponsored enterprise said in its report.

"With the spring homebuying season now upon us, a large majority of consumers continue to believe that it's a bad time to buy a home,"said Mark Palim, vice president and deputy chief economist at the GSE. "Homeowners sharing this belief frequently cited 'unfavorable mortgage rates' as the primary reason for their pessimism, further corroborating the often-discussed disincentive – or 'lock-in effect' – that many mortgage holders who may be considering moving have toward giving up their lower rates."