Buy-lock counts drop to 9-year low as Fed signals more rate hikes

He Federal ReserveSigns indicating further rate hikes for 2023 appear to have scared buyers out of the market in December. Last month saw the fewest purchase lock-ins in a single month since early 2014 as interest rate and affordability pressures challenged the market.

Mortgage origination activity fell 19.4% from November to December, marking nine consecutive months of decline. The fall was led by purchase locks, which fell 20.5%, according to black knightOrigination market monitor report. Term/rate refinances fell 11.2% and cash-out refinances 14.1%, with total refinance locks accounting for 16% of overall activity in December.

The final month of 2022 also marked the fewest overall rate locks on record since January 2000, when Black Knight began reporting origination metrics.

“The number of mortgage holders who locked in a rate to refinance their existing mortgage also set a new record for the fourth consecutive month,” said Kevin McMahon, president of Optimal Blue, a division of Black Knight.

The number of purchase mortgage foreclosures in December, which excludes the impact of record changes in home prices on volumes, fell 47% from the same month in 2021 and decreased 33% compared to levels pre-pandemic in 2019. Rate lock counts across the board were down a whopping 70% from last year’s levels, the data showed.

mortgage rates surpassed 7% levels in October before easing back due to slowdown in inflation figures. Rates have continued to slowly rise following continued signal from the Fed regarding additional rate hikes in 2023. freddy macThe latest weekly survey showed 30-year fixed-rate mortgages in 6.48% as of January 5, six basis points more than the previous week.

The published minutes of the summary of the central bank’s December meeting said that “a tight policy stance would need to be maintained until incoming data provided confidence that inflation was on a sustained downward path to 2 percent, which would likely take some time”.

“Mortgage rates declined during the first half of December, but reversed course when the Fed doubled down on its further tightening stance in 2023,” McMahon said.

Labor market data has become key to the pace of the Fed’s rate hikes amid the slow decline in the growth rate of inflation.

Employers added 223,000 jobs in December, marking two straight years of strong growth. The unemployment rate last month fell to 3.5% and the median hourly wage increased 4.6% compared to the previous year.

“The spread between mortgage rates and the 10-year Treasury yield narrowed another 22 basis points in December to 264 basis points, 40 basis points below the recent high, but is still up 81 basis points for the year.”

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