Spring Purchase Activity Jumps Despite Climbing Rates

Why It Matters

The strong purchase demand signals resilience in the housing market amid higher borrowing costs, supporting loan originators and home‑price stability.

Key Takeaways

• Mortgage locks rose 38% month‑over‑month in March.
• 30‑year fixed rates hit 6.35%, yet buyer share hit 71%.
• Adjustable‑rate mortgages reached 12% of total production.
• Rate‑and‑term refinance volume dropped 34% month‑over‑month.
• Cash‑out refinance volume increased 9% despite higher rates.

Pulse Analysis

The spring market opened with a burst of buying power that defied the typical slowdown associated with rising rates. Optimal Blue’s March data shows mortgage locks jumping 38 % from February and 20 % year‑over‑year, even as the average 30‑year fixed rate climbed 45 basis points to 6.35 %. Buyers accounted for 71 % of all locks, indicating that demand for primary residences remains robust despite tighter financing conditions. This momentum is especially notable after a sluggish start to the 2025‑26 cycle.

Alongside the purchase surge, lenders are seeing a pronounced shift toward adjustable‑rate mortgages (ARMs), which made up 12 % of total production—the highest share since October 2022. The higher ARM share reflects borrowers’ search for lower initial payments and greater purchasing capacity in a high‑price environment. Meanwhile, refinance activity is bifurcating: rate‑and‑term refinances fell 34 % month‑over‑month, while cash‑out refinances rose 9 %, keeping overall refinance volumes well above last spring’s levels. Pull‑through rates also diverge, with purchase loan pull‑through slipping to 80 % and refinance pull‑through climbing to 75.1 %.

The data points to a market that is adapting rather than stalling. Mortgage servicing rights (MSRs) on conforming 30‑year loans ticked up to a 1.24 % yield, signaling that lenders expect lower refinance churn and are willing to lock in higher returns. Hedged loan sales to agency cash windows rose 100 basis points, indicating faster capital recycling. For originators, the combination of strong purchase demand, a growing ARM segment, and resilient cash‑out refinance activity creates a diversified pipeline that can offset the drag from higher rates. Analysts will watch whether this resilience persists as the Federal Reserve’s policy trajectory unfolds.