Rates on Closed Loans at 4 Year High

The share of refinancing loans dropped to 38 percent of loans closed in March, down from 43 percent in February.  Ellie Mae's Origination Insight Report for the month notes that the 5 percent decline in those loans was consistent across all three loans types, FHA, VA, and conventional.

Refinancing slipped as the interest rate on 30-year fixed-rate mortgages rose to their highest level since January 2014.  Ellie Mae said that the average rate on closed loans which had been at 4.33 percent in January and 4.48 in February jumped to 4.69 percent in March.  The percentage of loans with adjustable rates (ARMs) increased to 6.3 percent from 5.5 percent the previous month.

The distribution of loans across loan types was largely unchanged.  The FHA share rose 1 percentage point to 20 percent while conventional loans were down 1 point to 66 percent.  VA loans appear to be permanently stuck at a 10 percent share.

The time to close all loans decreased one day to 41 days in March while the time to close purchases improved by two days to 43 days.  That timeline was four days shorter than in January.

The closing rate on purchases rose to 76.3 percent from 75.7 percent while the pull-through rate on refinances ticked down to 64.9 percent from 65.0 percent. Ellie Mae calculates closing rates by reviewing a sample of loan applications initiated 90 days earlier, in this case the December 2017 group. The overall closing rate was 69.6 percent in March.  The company notes that December applications that have not closed could still be active, or applications withdrawn by consumers or denied for incompleteness or non-qualification.

"With interest rates rising to the highest levels since January 2014, we're seeing the purchase market continue to gain momentum," said Jonathan Corr, president and CEO of Ellie Mae. "As we've seen in the past several months, the shift to a purchase market coupled with the adoption of digital mortgage solutions by our customers aids in driving down the time to close."

The Origination Insight Report mines data from a sampling of approximately 80 percent of all mortgage applications that were initiated on the Ellie Mae's cloud-based platform. The company contents the report is a strong proxy of the underwriting standards employed by lenders across the country.