MCT Reports Lock Volume Softens in June as Rate Incentive Fades

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Total lock volume declined 2.88% on a month-over-month basis in June, according to Mortgage Capital Trading, San Diego.

The firm’s July Lock Volume Indices, which reflect June’s lock volume data, said purchase locks dipped 1.83%, rate/term refinance volume fell 14.42% and cash-out refinances fell 3.85%. On a year-over-year basis, total volume fell 1.65%, purchase declined 2.67%, cash-out refinances slipped 0.9% and rate/term refinances rose 13.04%.

“The spring and summer buying window largely came and went as a missed opportunity,” said Andrew Rhodes, head of trading at MCT. “Rates spiked right when buyers historically hit the market, and that pushed a lot of people away from new housing.”

MCT noted that purchase activity, while slightly softer month over month, continued to anchor the broader index. “Purchase has been fairly consistent and has definitely been supporting overall originations,” Rhodes said. “From a year-to-date standpoint, originations are doing reasonably well. But continuing to see some slight deterioration makes sense, and we will likely keep seeing that unless there is a meaningful change in the rate environment.”

Rhodes said he is tracking a significant shift in communication strategy under new Fed Chair Kevin Warsh. Warsh cut his first FOMC policy statement from 341 words to 130 and removed all forward guidance. “He wants to limit the Fed’s involvement in driving the markets,” Rhodes said, “but I think reducing the information is actually going to increase speculation and volatility; the market has a lot less to go off of.”

There is more pressure right now for rates to go up than down, Rhodes said. “A lot of a potential hike is already priced in, but when it actually happens, it could still move the market slightly higher,” he added.

Geopolitical developments are adding further uncertainty to the rate outlook. Recent escalation involving Iran has raised the prospect of higher energy costs, which could feed into inflation and influence Federal Reserve rate decisions. “More uncertainty weighs on the market,” Rhodes said. “That is what has been driving the volatility.”