Optimal Blue: Refinances Up, Purchase Activity Down, Non-QM Hits Record High
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Refinances ticked up and non-QM lending hit a record high as purchase activity fell nearly 5% in July, according to Optimal Blue, Plano, Texas.
The firm’s July 2025 Market Advantage report found a 3% month-over-month drop in overall rate lock volume, led by a nearly 5% drop in purchase activity as affordability remained strained.
While purchase volume held steady year-over-year, refinancing showed renewed strength in July. Cash-out and rate-and-term refinance locks rose 5% and 7% respectively, partially offsetting the broader softness in the purchase market, Optimal Blue reported. Mortgage rates rose month over month across all loan types. The OBMMI 30-year conforming fixed rate ended July at 6.72%, up five basis points. FHA, VA and jumbo rates also ticked up, rising 3, 4 and 11 basis points respectively to 6.50%, 6.33% and 6.89%. Cash-out and rate-and-term refinance locks rose 5% and 7% respectively, partially offsetting the broader softness in the purchase market.
“As we near the end of peak buying season, 2025 purchase activity has largely tracked with 2024,” said Mike Vough, head of corporate strategy at Optimal Blue. “With affordability still a major constraint, purchase volume in line with 2024 is generally a disappointment to the industry based on 2025 projections. We’re seeing more cash-out–up 27% annually–and rate-and-term-up 13% annually–opportunities as borrowers with post-2022 loans respond to even modest rate improvements, and borrowers may be undergoing some financial stress based on cash-out increases.”
Optimal Blue said Non-QM lending reached a new milestone in July, accounting for 8% of total rate lock volume–the highest on record. At the same time, GSE-eligible originations fell to 52.2% and non-conforming lending rose to 16.8%, underscoring a market shift toward nontraditional financing solutions. This can be attributed to elevated rates, increased debt, growing openness to alternative forms of income verification, and conventional loan limits, which are prompting more borrowers to seek flexible qualification paths.
“There’s growing separation in the ways larger and smaller lenders are managing profitability,” Vough added. “We saw an uptick in agency MBS executions, insinuating more market share is going to depositories and large IMBs, alongside stronger bid-to-cover ratios, indicating lenders are chasing the highest price over other execution considerations. Combined with deeper engagement in OBMMI-tied CME futures and many conversations about capital markets strategies for non-agency loans, it’s clear lenders are being proactive in their pricing, margin and pipeline risk strategies.”
