Mortgage lock volume increased 7% in February compared with January, driven primarily by a surge in refinance activity, according to Optimal Blue’s Market Advantage report.
As mortgage rates decreased through the month, rate-and-term refinances surged nearly 40%, compared with the previous month. As a result, homeowners who had purchased homes at higher rates during 2024 seized the opportunity to lower their monthly payments.
Cash-out refinances also edged higher, rising 4% compared with January, while purchase lock activity remained subdued for a second consecutive month.
“Interest rate improvement, while marginal, is attracting refinance activity as homeowners who bought at higher rates work the numbers and find they can reduce their monthly payments or tap into home equity,” says Brennan O’Connell, director of data solutions at Optimal Blue, in the report. “The upcoming homebuying season will reveal whether purchase demand is poised for a rebound or if elevated rates will continue to keep buyers on the sidelines.”
Purchase volume was down 5% on a year-over-year (YoY) basis. Purchase lock counts – which control for home price appreciation – were down 9% from the same time in 2024 OptimalBlue says.
Conforming loan volume edged higher for a second month, reaching 52% of total volume after hitting a multi-year low in December.
FHA share remained just above 20%, while VA share grew slightly to sit at around 11.5%.
Non-conforming loan volume – which includes jumbo and non-QM loans – was mostly flat at 15.5% of total volume.
The mortgage rate spread to the 10-year Treasury hovered just above 230 basis points, a roughly 30 bps improvement from the same time last year but still roughly 30 to 40 bps above the long-term average.
The average credit score for cash-out and rate-and-term refinances rose by 2 and 4 points, respectively, to 695 and 732. Meanwhile, the average purchase credit score was flat at 737.
The average home purchase price increased to $480,200 in February, up from $476.200 in January. This resulted in a month-over-month increase in the average loan amount to $380,500, up from $376,400.
Photo: The Blowup
