Optimal Blue: Rate-and-Term Refinance Locks Up Significantly From 2023

(Image courtesy of Optimal Blue)

Optimal Blue, Plano, Texas, released its September Market Advantage report, finding a spike in rate-and-term refinance activity.

Rate-and-term refinances were up 50% from August and approaching 700% compared with September 2023.

Cash-out refinance activity was also up, but on a more moderate basis. That type of lock was up by 6% from August and more than 50% from last year.

Those refinance surges drove rate lock volume up overall 6% month-over-month in September.

Purchase locks were down from the previous month, but up about 6% year-over-year.

Refinance volume was about 32% of total production, and reached the highest level since January 2022 on an absolute basis.

“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,” said 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 average borrower credit score for purchases was 738. For rate-and-term refinances it was 737 and for cash-out refinances it was 699. Those are all up from last month.

The average loan amount increased from $372,400 in August to $383,700 in September. The average home purchase price grew by $10,000 to $475,800.

The share of conforming loan production, nonconforming loan production and VA loans rose, but FHA loan share fell.