Despite mortgage credit availability increasing to its highest level since August 2022, the spring homebuying season underperformed in May, according to Optimal Blue’s latest mortgage data report.

Mortgage rate locks decreased 5.87% month over month in May, according to Optimal Blue. A rate lock, which is an agreement between a lender and a borrower that the interest rate on the loan will not change during the period when it is being processed, is an indicator of mortgage demand.

Purchase activity was also flat in May compared to the prior month, which Optimal Blue cited as “clear underperformance for what is typically one of the strongest homebuying months of the year.”

“Rising mortgage rates are squeezing borrower affordability, while tighter spreads are putting pressure on lenders in the secondary market,” Brennan O’Connell, director of data solutions at Optimal Blue, said in a press release.

O’Connell added that the increase in mortgage rates, which spiked in mid-April and remained stubbornly high throughout May, had a deflating effect on homebuyer optimism.

“With the brief window of affordability relief now closed, the new data shows first-time buyers are feeling the strain, with modest declines in their share of conforming and [Federal Housing Administration] loan locks,” O’Connell stated.

High mortgage rates also weighed on refinancing activity in May, with the refinance share of rate locks falling from 21% to 16% during the month. Rate-and-term refinances were down 44.4% month over month, according to Optimal Blue, while cash-out refinances dipped 10%.

Non-qualified mortgage (non-QM) loans — which are loans that do not meet stricter lending guidelines set by the Consumer Financial Protection Bureau and cannot be purchased by Fannie Mae, Freddie Mac or federal government programs — accounted for 7.36% of May’s rate-lock volume, which Optimal Blue said continues “a gradual upward trend as lenders and borrowers explore alternative qualification paths.”