Mortgage activity remained resilient as purchase demand strengthened, despite interest rates climbing, according to Optimal Blue’s March 2026 Market Advantage report, released on Tuesday.
Total rate-lock volume increased 13% from February and 26% from a year earlier. Purchase activity drove the gains, with purchase lock volume rising 38% month over month and 20% year over year.
Refinance activity was mixed. Cash-out refinance volume rose 9% from February and 21% from March 2025, while rate-and-term refinance volume fell 34% month over month but remained more than 66% higher than a year ago. Refinance share accounted for 28% of total production in March, down from earlier in the year but still above 2025 levels.
“Purchase demand is carrying the market forward even as rates move higher,” said Mike Vough, senior vice president of corporate strategy at Optimal Blue. “That’s a strong sign for the spring market, especially with refinance share still at 28%, well above where it spent most of 2025.”
Mortgage rates increased across all major loan types during the month
Optimal Blue’s 30-year conforming fixed rate index rose 45 bps to 6.35%. Jumbo rates climbed 41 bps, U.S. Department of Veterans Affairs (VA) rates rose 44 bps and Federal Housing Administration (FHA) rates increased 21 bps.
The 10-year Treasury yield ended March at 4.30%, up 33 bps, while the spread between the 10-year Treasury and the 30-year mortgage rate widened to 205 bps.
On the secondary market side, execution trends shifted modestly. Best-efforts-to-mandatory spreads tightened for 30-year products, while agency cash window executions increased by 100 bps and securitization activity eased. Mortgage servicing rights (MSR) values rose 6 bps as higher rates dampened refinance expectations.
“In a higher-rate environment, lenders have to be more deliberate about how they execute and where they find value,” Vough said. “We saw some movement toward the cash window in March, but the more telling signal was MSRs moving higher as refinance expectations came down. That’s the market adjusting to a higher-rate backdrop.”
Purchase loans picked up
Purchase loans accounted for just over 71% of total volume in March, reflecting seasonal momentum as the spring homebuying season picked up. Conforming loans made up just over half of total volume, while FHA and non-conforming loans each represented 18%. VA loans accounted for 13% and USDA loans held steady at 1%.
Adjustable-rate mortgage (ARM) usage reached 12% of total production, marking the highest level since October 2022, Optimal Blue said.
Planned unit development (PUD) share, often seen as a proxy for new construction, rose to 28% of total volume, though it remained below year-ago levels.
Pricing trends showed some tightening in execution spreads. Best-efforts-to-mandatory spreads declined by 3 bps for conventional 30-year loans and 5 bps for government 30-year loans, while the spread for conforming 15-year loans increased by 7 bps. The share of loans sold at the highest price tier slipped to 79%, while loans in the lowest tier declined to 4%.
In loan delivery channels, agency mortgage-backed securities accounted for 41% of hedged executions, down slightly from the prior month. Meanwhile, sales through the agency cash window increased to 28%.
Borrower profiles remained relatively stable. First-time homebuyers represented 46% of conforming purchase locks and more than 70% of FHA volume, while VA first-time buyer share held near 46%. Debt-to-income ratios edged lower for FHA and VA loans and held steady for conforming loans, all below year-ago levels. The average purchase FICO score was 732.
Loan sizes remained elevated. The average loan amount dipped to just over $401,000 from $404,586 in February but stayed well above levels seen a year earlier. The average loan-to-value ratio was 81.32%. Regional differences persisted, with average loan amounts ranging from $888,536 in the San Francisco area to $306,283 in Indianapolis, and loan-to-value ratios spanning from 69.88% in the Bay Area to 89.47% in San Antonio.
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