Optimal Blue's September 2024 report, released today, showed a 50% month-over-month rise in rate-and-term refinances, driven by recent homeowners seeking lower rates. Though the FOMC cut its rate by 50 bps on Sept. 18, the market had anticipated the reduction, fueling a full month of increased refinance activity.
On an absolute basis, refinance production reached 32% of total production in September, marking the highest level since January 2022. Rate-and-term refinance lock volume was up nearly 700% year-over-year, and cash-out refinance volume rose a more modest 6% month-over-month but was still up more than 50% annually. Optimal Blue's July reading reported that refinance production only comprised 17% of total production.
“Refinance production has been trending higher for a few months now as mortgage rates rallied, but purchase activity had been stubbornly stagnant. However, September volumes indicate the tide may be turning,” commented Brennan O’Connell, director of data solutions at Optimal Blue. “Excluding April of this year, which was impacted by the timing of Easter, September marks the first month with a year-over-year (YoY) increase in purchase locks since the Fed began raising rates in Spring of 2022. As we move into Q4, this is a very encouraging sign that the market may have found a floor and production is on the upswing.”
The Texas-headquartered capital markets platform also observed, akin to other industry analysts' observations, that mortgage rates fell across the board. The Optimal Blue Mortgage Market Indices (OBMMI) 30-year conforming benchmark interest rate dropped 23 bps, while jumbo, FHA, and VA rates were down 22, 25, and 16 bps, respectively.
The report also noted that conventional and VA production grew market share. The share of conforming loan production rose roughly 0.5% to 54.4%, and the share of non-conforming production – including jumbo and Non-QM loans – rose 0.25% to 12.6%. The share of FHA loans fell roughly 1% to 18.7%, while VA rose .2% to 13.7%.
Another highlight from the report shared that the credit scores of rate-and-term refinance borrowers rose an average of 6 points to 737. The average conventional borrower credit score rose to 757, the highest since December 2020.
Meanwhile, average loan amounts and home prices rose. From August 2024 to September 2024, the average loan amount increased from $372.4K to $383.7K. The average home purchase price ticked up $10K to $475.8K after falling the previous two months.
