Optimal Blue: Purchase Demand Lifts Mortgage Lock Activity as Rates Rise
(Stock photo courtesy of Robert So/pexels.com)
Optimal Blue, Plano, Texas, found “resilient” mortgage activity as purchase demand strengthened despite higher rates. Total rate-lock volume rose 13% month over month and 26% year over year.
The firm’s March 2026 Market Advantage mortgage data report found that purchase activity led the month, with purchase lock volume up 38% from February and 20% from March 2025. Cash-out refinance volume increased 9% MoM and 21% YoY, while rate-and-term refinance volume declined 34% from February but remained more than 66% higher YoY. Refinance share finished March at 28% of total production, down from earlier in the year but still well above 2025 levels.
Mortgage rates moved higher across all major products in March. The Optimal Blue Mortgage Market Indices (OBMMI) 30-year conforming fixed rate ended the month at 6.35%, up 45 basis points from February. Jumbo, VA and FHA rates also increased during the month. The 10-year Treasury yield ended March at 4.30%, up 33 basis points, while the spread between the 10-year Treasury and the 30-year rate widened to 205 basis points.
“Purchase demand is carrying the market forward even as rates move higher,” said Mike Vough, senior vice president of corporate strategy at Optimal Blue. “That’s a strong sign for the spring market, especially with refinance share still at 28%, well above where it spent most of 2025.”
On the secondary side, Optimal Blue found that March data reflected modest shifts in execution. “Best-efforts-to-mandatory spreads tightened for 30-year products, while agency cash window executions increased 100 basis points and securitization activity eased,” the report said. Mortgage servicing rights values also rose 6 basis points as higher rates reduced refinance expectations.
“In a higher-rate environment, lenders have to be more deliberate about how they execute and where they find value,” Vough noted. “We saw some movement toward the cash window in March, but the more telling signal was MSRs moving higher as refinance expectations came down. That’s the market adjusting to a higher-rate backdrop.”
Key findings from Optimal Blue’s report include:
Volume trends and market composition
Refinance share eases: Refinances accounted for 28% of total lock volume in March as purchase demand accelerated. Rate-and-term refinance volume declined 34% MoM but remained more than 66% higher YoY, while cash-out refinance volume increased 9% MoM and 21% YoY.
Purchase share expands: Purchase locks accounted for just over 71% of total volume in March, with purchase activity rising 38% MoM and 20% YoY as the market moved deeper into the spring selling season.
Conforming’s majority narrows: Conforming share declined to just over 50% of total volume in March. FHA and non-conforming share each increased to 18%, while VA share eased to 13% and USDA held steady at 1%.
ARM usage climbs: Adjustable-rate mortgages accounted for 12% of total production in March, up 162 basis points MoM and reaching the highest mark since October 2022.
Rates and pricing
Rates move higher: The OBMMI 30-year conforming fixed rate rose 45 basis points to 6.35%. Jumbo rates increased 41 basis points, VA rates rose 44 basis points and FHA rates climbed 21 basis points. The 10-year Treasury yield increased 33 basis points to 4.30%, while the mortgage-to-Treasury spread widened to 205 basis points.
MSR values rise: MSRs for conforming 30-year loans increased 6 basis points to 1.24%, representing a 4.97 multiple, as higher rates reduced refinance expectations.
Execution spreads tighten: Best-efforts-to-mandatory spreads decreased 3 basis points for conventional 30-year loans and 5 basis points for government 30-year loans, while the conforming 15-year spread increased 7 basis points.
Top pricing share slips: The share of loans sold at the highest price tier declined 100 basis points to 79%, while loans sold in the fourth (or worse) tier decreased 100 basis points to 4%.
Channel and execution
MBS share slips: Agency mortgage-backed securities (MBS) securitizations accounted for 41% of hedged executions, down slightly from 42% the prior month.
Cash window gains ground: Hedged loan sales to the agency cash window rose 100 basis points to 28%.
Product mix and borrower profiles
First-time buyer share remains high: First-time homebuyers represented 46% of conforming purchase locks and more than 70% of FHA volume in March, while VA first-time buyer share held near 46%. Conforming first-time buyer share was up 3 points over the past three months and 1 point year over year.
Borrower profiles remain stable: Debt-to-income ratios for purchase loans were 36.3% for conforming loans, 43.3% for FHA and 42.7% for VA in March. Conforming purchase DTI was essentially flat from February, while FHA and VA purchase DTIs moved modestly lower. All three remained below year-ago levels. The average purchase FICO was 732.
Loan balances stay elevated: Average loan amount declined to just over $401,000 from $404,586 in February but remained well above year-ago levels. The average loan-to-value ratio was 81.32%. Loan amounts ranged from $888,536 in greater San Francisco to $306,283 in Indianapolis, while regional LTVs ranged from 69.88% in the Bay Area to 89.47% in San Antonio.
