The mortgage market has seen a stark divergence between purchase and refinance activity, according to Optimal Blue’s August Market Advantage report. Lock volumes fell 1.8 percent month-over-month as purchase volumes plummeted 9.8 percent. Meanwhile, rate-and-term refis surged 69.8 percent over the same period.
Refis rose to 26 percent of all originations, up both month-over-month and year-over-year. Non-qualified mortgage (Non-QM) lending also kept up its hot streak, climbing to a record 8.3 percent of originations.
Current 30-year mortgage rates are between 6 percent and 6.5 percent for conforming (6.49 percent), Federal Housing Administration (FHA) loans (6.26 percent) and Veterans Affairs (VA) loans (6 percent), the report stated.
“Borrowers are responding quickly to rate improvements, 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 release. “At the same time, purchase activity is beginning its typical seasonal decline, while product mix is shifting with non-QM lending at record levels.”
By loan product, conforming loans accounted for 51 percent of the total product share, followed by FHA loans at 19 percent, nonconforming at 17.3 percent and VA loans at 12.1 percent.
Single-family properties accounted for 64 percent of the product share, while manufactured homes sat at 1.4 percent.
The report also detailed the debt-to-income (DTI) ratio by loan type with the current average DTI for conforming loans at 36.9, FHA loans at 44.6 and VA loans at 43.7.
For first-time homebuyers, conforming loans accounted for 42 percent of loans, FHA for 68 percent and VA for 46 percent.
According to the report, the national average loan amount was $386,387 with 74 percent of loans for purchase and 26 percent for refi. Of the top 20 metropolitan areas, the top three included New York-Newark-Jersey City, N.Y.-N.J.-Penn. (5 percent of lock volume, average loan of $600,110), Chicago-Naperville-Elgin, Ill.-Ind.-Wis. (3.6 percent of lock volume, average loan of $371,746) and Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.V. (3.4 percent of lock value, average loan of $556,237).
The report also contained secondary market data. The pull-through rate for purchases was 84.2 percent, while the refi pull-through rate was 61 percent.
According to the report, there were notable changes in capital markets execution. Sales to the agency cash window declined to 24 percent while agency mortgage-backed securities climbed to 40 percent.
“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 are adjusting to increase profitability.”