MCT: Spring Purchase Demand Holds Firm Despite Rising Rates

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Mortgage Capital Trading, San Diego, found a modest increase in overall lock volume activity in March, driven largely by a strong spring purchase market that offset a notable pullback in rate/term refinancing.

According to MCT’s data, total lock volume increased 9.38%, purchase locks rose 22.86%, rate/term refinances declined 18.65%, and cash-out refinances edged up 5.01% in March.

Andrew Rhodes, head of trading at MCT, noted that considering the volatility seen in March, he would have expected the overall index to come in below baseline. “The fact that it held up speaks to the strength of the purchase market heading into spring,” he added.

Rhodes said purchase activity reflects the spring homebuying season in full effect: even as the Freddie Mac 30-year fixed-rate survey moved from 5.98% in late February to 6.46% by late March, buyers didn’t flinch.

“Heading into spring, people are done with holidays along with the winter weather and ready to buy,” Rhodes added. “They’re looking at housing regardless of where rates are — that seasonal drive is there, and the data reflects it.”

The same rate move that left purchase borrowers undeterred pushed rate/term refinance volume down 18.65% month over month, though rate/term activity still runs 103.60% above year-ago levels.

“Rate/term is dragging, and that speaks to the rate sensitivity of borrowers in this market,” Rhodes said. “At close to 6.5%, you’re going to see that drop-off. A five handle is still the mental hurdle.”

The broader macroeconomic backdrop adds complexity to the spring outlook. A year into the Liberation Day tariffs, the mortgage market continues to contend with persistently wide MBS-to-Treasury spreads and elevated construction costs, MCT said. Geo-political inflationary concerns bring expected contraction in GDP, which has renewed the stagflation conversation.

“GDP is expected to contract, and when you layer that on top of ongoing geo-political inflation, the stagflation story has real legs,” Rhodes added.

With the Federal Reserve in wait-and-see mode, rate expectations have shifted sharply. “The base case for most people right now is no movement at all this year,” Rhodes concluded. “But the fact that we’re even talking about hikes again tells you how much the conversation has changed.”