Purchase lock volume increased 16% in January compared with December but was down 6% compared with January 2024, according to Optimal Blue’s latest Market Advantage report.
The year-over-year decline in purchase lock counts was the lowest since Optimal Blue began tracking this data in 2019.
Meanwhile, refinance activity surged year-over-year, rising 20% for both rate-and-term and cash-out refinances. This indicates that a growing share of borrowers with higher-rate mortgages are finding opportunities to refinance, such as those who purchased between August and November of 2023.
“January lock data shows two important ways constrained affordability is impacting the housing finance market,” says Brennan O’Connell, director of data solutions at Optimal Blue, in the report. “On one hand, refinance activity saw impressive year-over-year growth despite elevated rates, signaling a growing pool of homeowners with mortgage rates high enough to justify a refinance.
“On the other hand, purchase lock counts declined year-over-year, marking the lowest January figures since we began tracking this data in 2019,” O’Connell adds. “A combination of high home prices and rates are curbing purchase activity, while at the same time fueling refinance demand among homeowners who purchased when rates were even higher.”
The month-over-month increase in purchase lock volume reflects typical seasonal momentum at the start of the year, Optimal Blue says in the report.
The average rate for a 30-year conforming mortgage started January above 7% but rallied late in the month, ending at 6.84%.
Other key rate indices followed a similar pattern, with jumbo rates up 2 bps, FHA rates unchanged, and VA rates up 4 bps.
After hitting a multi-year low in December, conforming loan share edged up slightly to 51% of total production – but remained near historical lows. This was offset by small declines in nonconforming and FHA loan share. VA lending share held steady.
Credit scores show mixed trends: The average credit score for purchase and rate-and-term refinance loans rose by 1 point to 738 and 728, respectively. Meanwhile, the average credit score for cash-out refinances declined by 4 points to 693.
Home prices continued to increase in January while loan amounts remained stable: The average home purchase price increased to $476,200, up from $473,700, while the average loan amount was $376,400, down from $376,900.
Photo: Breno Assis