Optimal Blue data shows purchase loans outpacing year-ago levels even as overall market softens
US mortgage activity continued to soften in August even as interest rates leveled off, with Optimal Blue's Market Advantage report showing total rate-lock volume down 9% month over month and 3% below August 2025 levels.
The data, drawn from Optimal Blue's product, pricing, and eligibility (PPE) engine — used to price and lock more than one-third of all US mortgages — underscores just how fragile the market remains when borrowing costs stay elevated.
Purchase lock volume fell 10% from July but remained 6% higher year over year, with purchase loans accounting for nearly 81% of total lock volume.
Refinance activity, meanwhile, bore the sharpest brunt of the slowdown.
Refi pullback deepens
Rate-and-term refinance volume dropped 13% month over month and plunged 47% below year-ago levels. Cash-out refinance activity fell 3% month over month and 5% year over year.
Even as overall volume declined, refinance share edged up 40 basis points to just over 19% of total production, a statistical artifact of a shrinking pie rather than renewed demand.
The Optimal Blue Mortgage Market Indices (OBMMI) 30-year conforming fixed rate — the benchmark for CME Group's Mortgage Rate futures — ended August at 6.72%, unchanged from July but 23 basis points higher than a year ago.
The 10-year Treasury yield held flat at 4.75%, while the spread between the two remained at 197 basis points, about 30 basis points tighter than the prior year.
"After a sharp move higher in July, rates leveled off in August, but that pause didn't translate into stronger volume," said Brennan O'Connell, director of data solutions at Optimal Blue.
"Purchase activity is still running ahead of last year, but with rate-and-term refinance volume down 47%, there just isn't much refinance demand to support the broader market. With rates still elevated and our 12-month forecast pointing to only gradual relief, the market remains highly sensitive to even modest changes in borrowing costs."
The 12-month forecast places the OBMMI 30-year conforming rate at 6.51%, a thin relief for a refi channel that has already seen brokers pivot hard toward alternative products.
Equity products are increasingly filling the gap left by the dried-up refi market.
"If half of the refinance equity extraction in the market is being done through equity, then if you're not offering it, you're missing out," Tom Davis, chief sales officer at Deephaven Mortgage, previously told Mortgage Professional America.
"Your borrowers are going somewhere else to get those deals done."
Secondary market and product mix
On the secondary side, best-efforts-to-mandatory execution spreads for conventional 30-year loans narrowed 4 basis points to 26 basis points, while mortgage servicing rights (MSRs) for conforming 30-year loans increased 4 basis points to 1.38%, a 5.52 multiple.
The share of loans sold with servicing retained climbed 4 percentage points to 57%, rebounding from 53% in June and July.
Non-qualified mortgage (non-QM) loans reached more than 11% of total lock volume in August, up 1 percentage point month over month and 3 percentage points year over year. Investor and debt service coverage ratio (DSCR) loans represented more than 35% of non-QM production, while bank statement loans accounted for nearly 30%.
Conforming share declined to 47% of total production, down more than 4 percentage points year over year, while FHA share increased 74 basis points to nearly 20%.
"We saw a mixed secondary-market picture in August, with tighter execution spreads and higher MSR values alongside some deterioration in top-tier execution share," said Mike Vough, senior vice president of corporate strategy at Optimal Blue.
"Servicing retention also moved back up to 57%, while the UM30 5.5 remained the dominant hedge even as production was more distributed across the 5.5 and 6.0 coupons. That gap between hedge concentration and where production is actually slotting is worth watching closely."
The average locked loan amount declined to $388,000 in August from $395,000 in July. The national average credit score across all locks was 729, ranging from 719 in Atlanta to 757 in the San Francisco Bay Area.
Brokers tracking the 30-year mortgage rate's approach toward its 2026 peak will find the credit-score stability a rare bright spot in an otherwise constrained volume picture.
Purchase pull-through improved 6 percentage points month over month to 84.9%, while refinance pull-through rose nearly 3 percentage points to 72.8%.
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