August mortgage pipeline data showed that overall rate locks were up 1.3% from July, driven by a 7.6% increase in cash-out activity, according to the latest Originations Market Monitor report from Black Knight, Inc. 

The month’s rise puts cash-out refinance lending up more than 41% over the last three months. The report is based on daily rate lock data from Black Knight’s Optimal Blue PPE.

“After starting the month below 3%, interest rates spent much of August hovering just above that point, with the conforming 30-year at 3.05% at month’s end, according to our OBMMI daily interest rate tracker,” said Scott Happ, president of Black Knight Secondary Marketing Technologies. “That sub-3% period seems to have been enough to spur some high-credit-score and high-balance borrowers to refinance, as average credit scores rose along with the non-conforming share of the market.”

The increase in cash-out activity was enough to push the overall refinance share of the market mix back above 50% for the first time since February. Locks on purchase loans stayed roughly flat as well, ticking down 0.8% from July.

“The rise in cash-out lending is hardly surprising given the extraordinary growth we’ve seen in tappable equity this year,” Happ continued. “We’ve now seen cash-out activity increase for three consecutive months, and with $173,000 in equity available to the average homeowner with a mortgage and home prices still climbing, there is still room in the market for growth. With equity levels at record highs and interest rates broadly expected to tick upward in coming years, cash-out lending is likely to play a much larger part in the overall refinance market.”

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