Optimal Blue: Sub-6% Rates Spark Refinance Surge
(Illustration credit: Gustavo Rezende via Pixabay)
Falling interest rates drove a sharp increase in refinance activity in early 2026, according to Optimal Blue, Plano, Texas.
The firm’s January Market Advantage report said total rate-lock volume rose 16% month over month and finished January 36% higher year over year. Rate-and-term refinances climbed 50% from December and more than 400% compared with January 2025.
Cash-out refinance activity also increased, rising 11% month over month and 38% year over year. Purchase volume grew a modest 3% from December but remained down 5% from a year earlier, reflecting the slower response of purchase demand to changing rate conditions early in the year, the report noted.
Mortgage rates moved lower across most products in January. The Optimal Blue Mortgage Market Indices 30-year conforming fixed rate declined 7 basis points to 6.07%. Jumbo rates fell 16 basis points to 6.25%, VA rates declined 7 basis points to 5.64% and FHA rates were largely unchanged at 5.99%. The average locked rate on the Optimal Blue PPE fell below 6% for the first time since August 2022.
“January’s data shows just how quickly refinance demand can respond when rates move lower,” said Mike Vough, senior vice president of corporate strategy at Optimal Blue. “It’s been more than three years since the market last saw average rates with a ‘5 handle,’ and crossing back below that level appears to have released meaningful pent-up refinance demand.”
Vough noted purchase activity is responding more gradually, which is typical this early in the year, “but the shift in borrower behavior is clear,” he said.
Vough also said January’s secondary market data reflects lenders positioning early for a potentially more active origination environment. “Pricing trends were increasingly tied to eligibility rather than outright price give-ups, and agency MBS securitization reached its largest share since 2024,” he said. “Meanwhile, rising MSR values and expanding investor participation point to a market focused on flexibility and long-term execution strategy as 2026 begins.”
