Mortgage rate locks fell to pre-pandemic levels in November

Mortgage rate lock volume in November declined for the third month in a row, to a level last seen in February 2020, just before the pandemic upheaval began, Black Knight said.

Loan locks sank 4.7% in November compared with October, and down 20.1% from November 2020, as rate-and-term refinance activity was hard hit by higher interest rates.

November's drop in rate lock activity follows a 6% month-to-month decline in October and a 10% fall-off in September. Black Knight's Market Volume Index for November was 240. In October the MVI was 252, September's was 268 and August's was 296. One year ago, the index was 299.

Consumers locked in 9.4% fewer rate-and-term refis in November (a 49 MVI) versus October (54), while less rate sensitive products had smaller drops in activity: purchase locks declined by 3.9% (132 from 138) and cash-out refis were down by 2.5% (59 from 60).

On a year-over-year basis, rate-and-term refis were down by 65%. But, that was countered by a 12.6% increase in purchase rate locks and a 35.7% rise in cash-out refi volume.

"While 30-year rates ended November relatively flat from where they were at the start of the month, there was some volatility in rate offerings throughout the month," Black Knight Secondary Marketing Technologies President Scott Happ said in a press release. "Rates moved up and down within a roughly 21 basis point range throughout the month as the market digested news of both the Fed's tapering announcement and the new omicron variant."

The only product to gain market share during the month were nonconforming loans, up 58 bps from October to 14.4%. Conforming mortgages made up 65.9% of rate locks, down a scant 3 bps; Federal Housing Administration was down 21 bps to 10.5% and Veterans Affairs had an 8.4% share, down 34 bps. U.S. Department of Agriculture mortgages had a 0.8% share.

On a year-over-year basis, the changes are more dramatic. Nonconforming had a 564 bps increase in market share compared with November 2020. For the FHA-insured product, the share rose 59 bps. At the same time, the conforming share dropped by 302 bps and the VA share fell 312 bps.

While home price value increases have moderated in recent months, they are still at record high levels. The average loan amount rose by $7,000 to $337,000 in November.

“As a result, we continue to see nonconforming jumbo loan products gain market share at the expense of agency volumes," Happ said. "With higher conforming loan limits announced by the Federal Housing Finance Agency taking effect at the start of 2022, it will be interesting to see to what degree this trend persists."