Optimal Blue: Refinance Activity Surges in January

Optimal Blue, Plano, Texas, reported that refinance activity jumped year-over-year in January, by 20.1% for cash-out refinance lock volume and 21.7% for rate/term refinance.

However, purchase lock volume fell by 0.6%, to place overall year-over-year lock volume growth at 3.1%.

Comparing January to December, overall rate lock volume was up by 10.8%, with a 15.9% increase in purchase lock volume and 8.9% increase in cash-out refinance volume. However, rate-and-term refinances fell 19.9% month-over-month.

“January lock data shows two important ways constrained affordability is impacting the housing finance market. On one hand, refinance activity saw impressive YoY growth despite elevated rates, signaling a growing pool of homeowners with mortgage rates high enough to justify a refinance. On the other hand, purchase lock counts declined YoY, marking the lowest January figures since we began tracking this data in 2019,” said Brennan O’Connell, Director of Data Solutions at Optimal Blue. “A combination of high home prices and rates are curbing purchase activity, while at the same time fueling refinance demand among homeowners who purchased when rates were even higher.”

Purchase lock counts, which control for home price appreciation, were down 6%.

The conforming loan share edged up to 51.4% of total production, but that still leaves it near historical lows. Nonconforming loans made up 15.5% of the product mix, with FHA at 20.9%, VA at 11.5% and USDA at 0.7%.

The average credit score for purchase and rate-and-term refinance loans rose by 1 point each to 738 and 728, respectively. However, the average score for cash-out refinances fell by 4 points to 693.

The average home purchase price rose from $473,700 to $476,200. The average loan amount fell slightly from $376,900 to $376,400.