Refinance Share of Mortgage Market Keeps Shrinking

A common theme in the mortgage market over the last few months has been the number of refinances decreasing as interest rates ticked up from the previously unheard-of lows that persisted for more than 18 months. A new report shows that trend continued in October.

According to a new report from Black Knight, the refinance share of the mortgage market fell to 45% in October, the lowest it’s been since June. Conversely, the purchase share of the market has risen to 55%.

The decline in the refinance share was driven by a 23% drop in rate/term refinances from September to October.

Black Knight’s report is based on interest rate locks within a given month.

Overall, rate locks were down by 5.9% from September, with purchase locks rising by 0.4% and cash-out refinance locks declining by 0.3%.

But the big story is rate/term refinances, which are now down nearly 63% from the same time last year.

Cash-out refinances, on the other hand, are up almost 33% from last year.

And given the current conditions of the mortgage market, that trend will also likely continue going forward.

“The dynamics of the refinance market are changing, with a sharp shift away from rate/term refis to cash-out lending," Black Knight Secondary Marketing Technologies President Scott Happ said.

"This shift tends to happen in any rising rate environment, never mind one in which American mortgage holders have more than $9 trillion in tappable equity available to them,” Happ added. “While we did see cash-out locks tick down in October, the overall trend toward an equity-centric refi market remains strong and one we will continue to watch closely in the coming months."