What rate lock activity means for the Spring purchase market

April's increase in rate lock activity does lend some support to the optimistic views on Spring's market, according to Optimal Blue.

Its Market Volume Index, a measurement of rate lock activity, was at 109 for April. This was up from 105 in March, a gain of 3.2%, and 103 for April 2024, 5.9% higher.

This follows the release of March's pending home sales index from the National Association of Realtors showing its biggest gain since December 2023.

It also supports anecdotal comments on open title orders for April that the four largest players made during their first quarter earnings call.

But the data for purchase locks tells an interesting tale. While those were up 7.5% compared with one month ago, versus April 2024, they were down by 5%.

Refinancings edge lower compared with March

Refinance volume, for both rate-and-term and cash-out varieties, on the other hand, were lower than in March, likely because of the volatile rate environment following the April 2 tariff announcements. But both were up compared with one year ago, the Optimal Blue Market Advantage Report said.

Refis, for any purpose, made up 21% of April's volume, down from 25% in March. Rate-and-term locks were down 15.4% versus the prior month, but up 172.9% compared with April 2024.

Meanwhile, cash-out locks were 3.2% lower versus March but up 34.5% over a year ago.

Optimal Blue's own mortgage rate data found the 30-year conforming fixed moving during the first 10 days of April between 6.48% and 6.98%, ending the month near the middle of that range at 6.71%.

What product the rate shift is driving borrowers to

The product type that benefitted most from the rate roller coaster were Federal Housing Administration-insured mortgages, whose market share rose 57 basis points from March to 20.2%.

"Last month's report showed early signs of spring homebuyer activity, and April confirms the season is underway with a solid increase in purchase locks," said Brennan O'Connell, director of data solutions at Optimal Blue, in a press release. "We also saw a shift toward FHA loans, often used by first-time or credit-challenged buyers, and away from non-conforming products, possibly reflecting investor caution in response to broader economic uncertainty."

Rates for FHA loans ended the month at 6.44%, while jumbo loans were at 6.84%, the Optimal Blue data noted.

Conforming mortgages made up 51% of all locks, almost even with the prior month, while nonconforming mortgages saw their share fall to 16.4%, a decline of 46 basis points. But when compared to one year ago, the conforming share was 583 basis points lower and the nonconforming was 270 basis points higher.

How loan product mix changes compared with March

Separately, the Mortgage Bankers Association's Mortgage Credit Availability Index, which measures product offerings, was unchanged in April from March at 102.9. The main components, conventional and jumbo, also did not change month-to-month.

However, the jumbo subindex was 0.1% lower than March, and the conforming was 0.2% higher.

"Overall levels of credit supply remain tight but have generally grown since 2023, as lenders continue to offer cash-out refinance loan programs as well as jumbo and non-QM loans," Joel Kan, the MBA's deputy chief economist, said in a press release. "Lenders remain positioned for potential refinance opportunities as mortgage rates continue to fluctuate."