Mortgage refinance demand surged in July to levels not seen since September 2022 amid softening interest rates, Optimal Blue reports.
The lower interest rates seen in July also coaxed increased purchase activity, which, combined with greater refi activity, drove a 3.5% month-over-month increase in mortgage rate lock volumes.
“The July report shows a notable uptick in refinance activity, particularly rate-and-term refinances, which jumped 12% as borrowers responded to declining interest rates,” says Brennan O’Connell, director of data solutions at Optimal Blue, in the firm’s July 2024 Market Advantage report. “The drop in the Optimal Blue Mortgage Market Indices 30-year conforming rate to 6.67% played a significant role in this growth, and we observed the highest level of refinance activity since September 2022.”
Purchase activity increased 2.5% in July compared with June but was down 7% year-over-year.
Still, that’s a significant improvement over June’s 17% year-over-year decline, suggesting a potential stabilization in purchase demand as the market adjusts.
Most of the volume in July was refinances: Cash-out refinances grew by 5.9%, month over month, while rate-and-term refinance activity surged 12.3%, reflecting borrower sensitivity to lower rates.
The refinance share increased to 17% of total volume – an 81-basis-point increase from June and a 472-basis-point rise year-over-year.
This aligns with trends in the 30-year conforming rate, which ended July 2024 at 6.67%, nearly identical to the 6.68% rate that closed out September in 2022, Optimal Blue says.
As of the end of July the average rate for. 30-year, fixed rate mortgage was 6.67%, down 26 basis points from June.
Meanwhile, the 10-year Treasury yield dropped by 27 basis points to 4.09%. The spread between the 30-year conforming rate and the 10-year Treasury remained stable at 258 basis points, an uptick of just 1 basis point.
The loan mix in July shifted toward agency production. Conforming loans increased market share to 56.1% (+18 bps), FHA loans grew to 19.0% (+61 bps), and VA loans rose to 11.9% (+22 bps).
Conversely, non-conforming loans, including jumbo and non-QM, saw a decline in market share, falling to 12.4% (-107 bps).
The average loan amount decreased to $369,000 in July – down from $374,000 in June and reflecting the shift away from non-conforming loan types.
Credit scores remained stable, with the average score holding steady at 732.
Photo: Artem Beliaikin