Optimal Blue Reports Purchase Demand Rebounding
(Illustration courtesy of Curtis Adams via pexels.com)
Optimal Blue, Plano, Texas, found a “meaningful improvement” in lock activity in February as lower mortgage rates helped bring purchase borrowers back into the market.
Total rate-lock volume rose 9% month over month and was nearly 40% higher year over year, the firm’s February 2026 Market Advantage report said. Purchase lock volume increased more than 14% from January and 5% compared with February 2025, driving the refinance share down to 41% of locks from 44% in January. Rate-and-term and cash-out refinance activity edged modestly higher from January but remained sharply stronger YoY.
Mortgage rates declined across all major products in February. The OBMMI 30-year conforming fixed rate finished the month at 5.90%, down 17 basis points from January. Jumbo and VA rates each declined 11 basis points during the month, while FHA rates fell 13 basis points. The 10-year Treasury yield closed the month at 3.97%, down nearly 30 basis points, and the spread between the 10-year Treasury and the OBMMI 30-year rate widened to 193 basis points as the mortgage rally lagged the broader bond market.
“February’s data shows the market settling into a healthier balance between purchase and refinance activity as rates moved lower,” said Mike Vough, senior vice president of corporate strategy at Optimal Blue. “Purchase demand is back after a slow start to the year, but the refinance share is still running at 41%, which is higher than anything we saw between early 2022 and late last year.”
Secondary market data in February pointed to shifting execution dynamics as pricing spreads widened and delivery strategies evolved, the report said. Best-efforts-to-mandatory spreads widened for conventional products while hedged loan sales moved toward the agency cash window. At the same time, agency mortgage-backed securities securitization declined and mortgage servicing rights values increased despite falling benchmark rates.
“In an environment like this, lenders are paying close attention to how they execute and manage risk,” Vough added. “We’re seeing more active positioning across delivery channels and servicing assets as lenders balance near-term pricing with longer-term portfolio value.”
Key findings from the Market Advantage report include:
Volume trends and market composition
• Refinance activity remains strong: Refinances accounted for 41% of total lock volume in February, down from 44% in January, as purchase demand rebounded. Rate-and-term refinance locks increased 3% MoM and 280% YoY, while cash-out refinance volume rose 1% MoM and 34% YoY.
• Purchase demand rebounds: Purchase lock volume rose 14% MoM and 5% YoY, marking a meaningful improvement from January’s slower start to the year and helping restore a more balanced mix between purchase and refinance activity.
• Non-conforming share expands: Conforming loans represented 53% of total lock volume in February, down 28 basis points MoM but up 62 basis points YoY. Non-conforming share increased to 16%, rising 91 basis points MoM and 90 basis points YoY. FHA loans accounted for 17% of locks, VA loans for 13% and USDA loans for 1%.
• ARM utilization rises: Adjustable-rate mortgages comprised 10% of total lock volume in February, up 111 basis points MoM and 337 basis points YoY from 6.9% last year.
Rates and pricing
• Rates move lower: The OBMMI 30-year conforming fixed rate declined 17 basis points to 5.90%. Jumbo and VA rates each fell 11 basis points, while FHA rates declined 13 basis points. The 10-year Treasury yield declined nearly 30 basis points to 3.97%, while the mortgage-to-Treasury spread widened to 193 basis points.
• MSR values increase: Mortgage servicing rights for conforming 30-year loans rose 2 basis points to 1.18%, representing a 4.74 multiple, even as benchmark mortgage rates declined during the month.
• Spreads adjust across products: Best-efforts-to-mandatory spreads widened for conventional products, with the conforming 30-year spread increasing 3 basis points and the conventional 15-year spread rising 1 basis point. The government 30-year spread decreased 5 basis points.
• Loan pricing mix shifts slightly: The share of loans sold at the highest price tier declined 100 basis points to 78%, while second-tier executions increased 100 basis points to 13%.
Channel and execution
• Securitization share pulls back: Agency MBS securitizations accounted for 42% of hedged executions in February, down from 47% in January.
• Cash window share jumps: Hedged loan sales to the agency cash window rose 500 basis points MoM to 29%, the largest share of cash window deliveries since February 2025.
Product mix and borrower profiles
• Credit profiles diverge: Purchase FICO scores averaged 734 in February, down 1 point MoM and 3 points YoY. Refinance credit profiles strengthened, with cash-out scores averaging 705 (up 1 point MoM and 10 points YoY) and rate-and-term scores averaging 749 (up 2 points MoM and 18 points YoY).
• Loan amounts climb: The national average loan amount increased from $400,667 in January to $404,586 in February, marking the first time the average has remained above $400,000 for consecutive months. The national average loan-to-value ratio was 80.32%. Loan amounts ranged from $875,787 in the San Francisco Bay area to $319,743 in San Antonio, with regional LTVs spanning from 68.45% in the Bay area to 89.38% in San Antonio.
