Despite a slight jump in pending home sales, activity on the refi side will likely outpace the purchase market in the months ahead
The beginning of March saw average 30-year fixed mortgage rates plunge to their lowest level in three months, sparking a big uptick in refinances as homeowners rushed to lock in cheaper rates.
But with rates beginning to tick upward again throughout the month – and much uncertainty on their direction in the months ahead – is that trend about to fade?
Refinance business hasn’t been hugely impacted to date by the slight jump in rates seen this month, according to Thuan Nguyen (pictured), founder of The Loan Factory, although when it comes to future prospects much will depend on whether they continue climbing and where they eventually land.
“I’ve picked up some refinance [at the beginning of 2025],” he told Mortgage Professional America. “Rates have been dropping for the last seven weeks or so, slowly. Last week, rates started picking up again – but I do see that I have a lot more refinance.
“If rates continue to go up, refinance will stop for sure. But another thing I realized is that people need money, for various reasons: debt consolidation, home improvement, or they need to build an ADU [additional dwelling unit].”
That means home equity lines of credit (HELOCs) are as popular as ever – but for buyers who have a small balance on their first loan, refinancing that first mortgage becomes one of the best ways to tap into equity.
While a rapid rise in rates since 2022 stunned many borrowers and torpedoed the refinance market, homeowners are now accustomed to that higher-rate environment, while plenty who purchased since 2023 are seeing lower rates than when they first signed for their mortgage.
15-year fixed-rate mortgages, which are popular among borrowers who want to refinance, saw rates increase to 5.89% this week, according to Freddie Mac, compared with 5.83% seven days prior. But that’s still down from 6.11% at the same time last year, and Nguyen said borrowers are no longer viewing their prospects through the lenses of the COVID-19 market.
“One or two years ago, when rates jumped so high, people got scared and they didn’t want to do anything,” he said, “but now they’ve gotten used to higher rates and that’s the reason why I see more and more refinance.”
Spring purchase market surge looking unlikely
Meanwhile, the Mortgage Bankers Association (MBA) said purchase applications were up by 1% for the week ended March 21, spurred mainly by higher FHA-backed activity, although Nguyen said those higher rates compared with years gone by are proving more troublesome for clients to overcome on the purchase side than in the refinance market.
“They’ve gotten used to [the higher rates], but again rates are so high – and home prices have never dropped. Even in the last few years, rates have gone up a lot,” he said. “The real estate market has slowed down a lot – but home prices are not dropping at all.
“So it’s still out of reach for many people. I see a little bit of a pickup in purchase as well, but not a lot. People are still afraid and staying on the sidelines.”
Pending home sales increased slightly in February, according to the National Association of Realtors (NAR), but remained mired well below historical levels.
The National Association of Realtors reports a 2% increase in pending home sales for February, led by gains in the South. Sam Williamson of First American notes that sales are still near historical lows, indicating a slow start to the spring season. https://t.co/1kY9Zc72tl
— Mortgage Professional America Magazine (@MPAMagazineUS) March 27, 2025
Reasons to be cheerful for 2025
But while it’s unclear where mortgage rates will land by the end of the year – and there’s still plenty of uncertainty about the direction of the economy after a rollercoaster opening two months for the Trump administration – Nguyen sounded a positive note on the future of the housing market, highlighting Americans’ constant need for housing and refinancing options.
That should ultimately put upward pressure on sales activity, he said, to kickstart what’s been something of a sluggish year for the housing and mortgage markets so far in 2025.
“I’m pretty optimistic,” he said. “People always need to buy a house. People always need to refinance or cash out. So business is still the same, and it can only get better. I don’t see how it can get worse.”
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