Lock volume rises 3.2% in April despite mortgage rate volatility

Despite a whipsaw of mortgage rates at the start of the month, mortgage purchase lock volume rose 7.5% in April, according to a report from Optimal Blue. Overall, lock volume rose 3.2% from March.

The bond market’s response to the Trump tariff announcements in the beginning of the month sent rates up by an eighth of a point overnight. The volatility in rates didn’t wound the purchase market, but a few strong days of refinancings in the beginning of the month couldn’t be sustained.

According to Optimal Blue, the share of refis fell overall to 21% in April, down from 25% in March. Cash-out refinances fell 3.2% sequentially and rate-term refinances dropped 15.4%.

The share of Federal Housing Administration (FHA) mortgage volume rose to 20.2%, and non-agency loan share fell to 16.4%. The FHA share climbing 50 basis points and a corresponding drop in non-agency lending suggests reduced investor risk tolerance in April, Optimal Blue said.

However, conditions appear to be steadying. Purchase mortgage applications have been on the rise in recent weeks and several lenders have reported much stronger lock activity.

“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 Optimal Blue’s Brennan O’Connell in a statement. 

“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.”

While inflation continued its trend of modest declines in April, consumer sentiment suggests prospective homebuyers are still taking a wait-and-see approach before pulling the trigger on a new home. Overall, purchase locks were down 5% year-over-year.

Fannie Mae’s latest Home Purchase Sentiment Index for April shows that the public overwhelmingly thinks it’s a bad time to buy a house. Consumer confidence has dropped by 32% since January, and a Redfin survey showed that 24% of respondents are canceling plans to make large purchases, and 32% said they’re pausing those searches.