Homeowners were quick to refinance in July, taking advantage of nearly a quarter-point dip in mortgage rates, according to the latest report from Optimal Blue.
While purchase lending fell 10% in the month, rate-and-term refinances “surged” nearly 70%, their strongest showing so far this year, the capital markets platform noted.
Meanwhile, in the first week of September, refinance applications also continued to increase, according to the Mortgage Bankers Association (MBA), rising from 46.9% of total applications in the previous week to 48.8%.
Total applications for the week were up 9% as rates continued to slide, the MBA said. Purchase applications continued to run more than 20% ahead of last year’s pace, MBA Deputy Chief Economist Joel Kahn pointed out, as loan rates declined for the second consecutive week. The 30-year fixed rate fell to 6.49%, down 20 basis points over the past two weeks to their lowest level since October 2024.
In August, Optimal Blue’s Mike Vough said, borrowers responded quickly to rate improvements, “driving the strongest month for rate-and-term refinances we’ve seen this year.”
Refinances rose to 26% of originations, up sharply month-over-month as well as year-to-year.
The Non-QM loan share has climbed from 1.4% five years ago to now 8.3% of total originations.
However, Vough also noted that purchase activity is beginning its typical seasonal decline, while product mix is shifting with Non-QM lending at record levels. Non-QM lending “kept up its hot streak” in August, he said, climbing to a record 8.3% of total originations.
The Non-QM share was up from 5.6% a year ago and just 1.4% in August 2020, extending its steady growth trend, the company reported.
Some other highlights from the Optimal Blue report:
- The share of conforming loans in August fell 123 basis points to 51%. VA loans gained 78 bps to a 12.1% share of the market, non-conforming increased 48 bps to 17.3%, FHA edged up 1 bp to 19%, and USDA dipped 5 bps to 0.7%.
- Adjustable-rate mortgages (ARMs) accounted for 10.25% of overall lock activity.
- New build activity softened as planned unit development lending fell below 28% of production. That’s down more than 4.5% year-over-year as new construction continued to contract.
- Borrower profiles remained strong as the average FICO credit score remained unchanged at 756.
- The first-time buyer share also held flat for conforming and FHA loans, but dipped slightly for VA loans.
- Average loan amounts rose to $386,387 from $382,476 in July. They ranged from a high of just over $600,000 in metro New York to a low of $304,511 in Indianapolis. Average loan-to-value ratios ranged from 73.56 in New York to 81.61 in Indianapolis.
