Evidence of householders’ need to refinance on the first indicators of falling mortgage rates appeared in August’s information as rate-and-term transactions hit a 2025 high.
Rate-and-term locks accelerated 69.8% from the prior month, in accordance to Optimal Blue’s Market Advantage report. Compared to August 2024, although, volumes completed 8.7% decrease.
Cash-out refinances additionally noticed a month-to-month bump upward of two.2% and surged 19.9% from a 12 months in the past. The upswing in each varieties of transactions provides credence to reviews from a wide range of sources that time to a possible surge of $300 billion in refinancing if curiosity rates fall beneath sure thresholds.
“Borrowers are responding rapidly to price enhancements, driving the strongest month for rate-and-term refinances we have seen this 12 months,” mentioned Mike Vough, head of company technique at Optimal Blue, in a press launch.
Mortgage rates completed August decrease throughout all mortgage varieties by between 24 to 33 foundation factors, reversing the earlier month’s upward development to drive householders to the borrowing desk. The 30-year conforming common fell by nearly 1 / 4 level from July to 6.49%, the product-pricing engine’s platform information confirmed.
A drop in buy locks, although, laid out the challenges nonetheless in entrance of consumers in right this moment’s housing market, with volumes dropping by 9.8% from July. On a year-over-year foundation, buy locks have been close to par, edging down by a smaller 0.5%. Along with falling curiosity rates, seasonal residence shopping for developments contributed to the divergence between buy and refi exercise final month.
Despite the notable surge within the refinance class, whole lock quantity pulled again 1.8% month over month however was flat versus a 12 months earlier, with only a 0.1% uptick, as the upper variety of buy loans dampened progress. The change led Optimal Blue’s index rating to fall to a studying of 99, with purchases making up nearly three-quarters, or a 74% share of transactions final month. Refis accounted for the remaining 26%.
Optimal Blue’s information additionally confirmed continued progress in non-QM exercise, with originations nabbing an 8.34% share relative to whole quantity, a brand new report high. The non-QM slice elevated from 8.03% in July.
August’s conforming share of locks got here in at 51%, whereas nonconforming made up 17.3% of exercise. Among government-sponsored exercise, Federal Housing Administration-backed loans accounted for 19%, and Department of Veterans Affairs-guaranteed mortgages garnered 12.1%. U.S. Department of Agriculture locks equaled 0.7%.
Meanwhile, adjustable-rate mortgages represented 10.25% of August lock quantity.
Securitization exercise sees rising lender curiosity
Agency mortgage gross sales additionally offered a change in lenders’ secondary market technique, in accordance to Optimal Blue. Cash-window deliveries fell to 24% of quantity, whereas company mortgage-backed securitizations garnered 40%, signaling elevated MBS curiosity amongst giant lenders, Optimal Blue reported.
“This development underscores how lenders are strategically adapting to optimize execution so as to achieve market share,” Vough mentioned. “We’re seeing deeper engagement in securitization alongside extra loans offered to the best value throughout mortgage gross sales, signaling that capital markets methods are adjusting to improve profitability.”
Loans offered on the highest pricing tier elevated to a 75% share, suggesting lenders supplied cleaner profiles of their offers, Optimal Blue additionally mentioned.
