Borrowers rushed to refinance[1] in August as mortgage rates eased, pushing rate-and-term refi lock volume up 70% from July, according to Optimal Blue’s Mortgage Market Advantage report released Wednesday.
“Borrowers are responding quickly to rate improvements[2], driving the strongest month for rate-and-term refinances we’ve seen this year,” Mike Vough, head of corporate strategy at Optimal Blue, said in a statement. “At the same time, purchase activity is beginning its typical seasonal decline.”
Overall activity dipped 1.8% month over month, with purchase locks down 9.8%. Refinancing, however, increased its share to 26% of all originations.
In August, product mix shifted as nonqualified mortgage (non-QM[3]) lending reached a record share of 8.3%.
By product type, conforming loans dropped 123 basis points to 51% of all originations. Federal Housing Administration (FHA) loans edged up to 19% (+1 bps), U.S. Department of Veterans Affairs (VA) loans[4] rose to 12.1% (+78 bps), and U.S. Department of Agriculture (USDA) loans increased to 0.7% (+5 bps). Adjustable-rate mortgages[5] accounted for 10.25% of the total.
Rates also shifted lower. The Optimal Blue Mortgage Market Indices’s 30-year conforming fixed rate ended August at 6.49%, down 25 bps from July. The share of highest-pricing tier loans rose five bps to 75%, which Optimal Blue said reflects “cleaner loan profiles” and stronger pricing.
Lower rates also pressured servicing values. Mortgage servicing rights[6] for 30-year loans slipped 4 bps to 1.15%. In the secondary market, agency cash window deliveries fell to 24% of executions, while agency mortgage-backed securities deliveries climbed to 40%.
“This trend underscores how lenders are strategically adapting to optimize execution in order to gain market share,” Vough said. “We’re seeing deeper engagement in securitization alongside more loans sold to the highest price during loan sales, signaling that capital markets strategies[7] are adjusting to increase profitability.”
References
- ^ refinance (www.housingwire.com)
- ^ rate improvements (www.housingwire.com)
- ^ non-QM (www.housingwire.com)
- ^ U.S. Department of Veterans Affairs (VA) loans (www.housingwire.com)
- ^ Adjustable-rate mortgages (www.housingwire.com)
- ^ Mortgage servicing rights (www.housingwire.com)
- ^ capital markets strategies (www.housingwire.com)