MCT data shows rate/term refis rose nearly 10%, but traders say stable conditions, not volume, are key to profits
Mortgage lenders saw a solid bump in refinance volume in July, with rate/term refinance locks rising nearly 10% as rates dipped late last month. But even with signs of borrower responsiveness and year-over-year gains, volatility remains a major obstacle to margin stability, according to new data from Mortgage Capital Trading, Inc. (MCT).
The company’s July Lock Volume Indices report revealed a 9.89% month-over-month jump in rate/term refis, the most significant shift among loan types. Meanwhile, purchase lock activity rose 1.56%, and cash-out refinances increased 3.14%, showing modest strength across the board.
Overall, total mortgage lock volume grew by 2.11% compared to June.
“The pickup in rate/term refinances were likely rate-driven,” Andrew Rhodes, senior director and head of trading at MCT, said in the report. “With a drop from the highs in rates toward the end of June, there was a direct effect on refinance activity. It’s a strong example of just how reactive this market continues to be.”
Compared to the same month last year, total lock volume increased by 9.39%. Rate/term refinance volume was up 35.49% year-over-year, and cash-out refis rose 24.41%. Purchase activity, despite affordability and inventory challenges, rose 7.04% from July 2024, pointing to steady demand in the homebuying market.
While refinances are rebounding from low base levels, Rhodes pointed out that purchase loans remain the backbone of the market.
“Rate-term and cash-out refinances may bounce around, but purchases are what’s driving the boat,” he said.
This week, though, long-term mortgage rates saw a slight rise after five consecutive weeks of declines. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.72% as of July 10, up from 6.67% the previous week. The 15-year FRM ticked up to 5.86% from 5.80%.
“Despite ongoing affordability challenges in the housing market, we are seeing home purchase and refinance applications respond to the downward trajectory in rates, increasing by 25% and 56%, respectively, compared to the same time last year,” said Freddie Mac chief economist Sam Khater.
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Even with a stronger-than-expected jobs report, with 147,000 non-farm payrolls added in June versus forecasts of 110,000, financial markets showed restraint. That steadiness surprised Rhodes, who expected more turbulence.
“I was concerned that there’d be a lot more volatility in the markets, but it seems we’ve seen it trail off,” he said.
Still, macro uncertainty lingers. Inflation, tariff developments, and a lack of clarity around the Federal Reserve’s next move continue to weigh on lender and borrower sentiment.
“Inflation is still very much a concern,” Rhodes noted. “And while we’ve seen improvement in GDP estimates for Q2, consumers are still unsure about what’s ahead.”
Looking ahead, a potential Fed rate cut later in the quarter could give another lift to lock volumes. But for now, the industry’s biggest challenge remains managing through unpredictable swings in rate and sentiment.
“Our best-case scenario is a steady, moderate uptick in lock activity with range-bound rates. Volatility is the real killer when it comes to managing margins,” Rhodes said.
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