Optimal Blue Mortgage Data Shows 50% Refi Jump In January As Rates Dip

Optimal Blue reported a sharp increase in refinance activity in January as falling mortgage rates spurred borrowers to act, according to its January 2026 Market Advantage data report released on Tuesday.

Total rate-lock volume rose 16% from December and was 36% higher than in January 2025. The increase was driven primarily by rate-and-term refinances, which jumped 50% month over month and were more than four times higher compared with January 2025.

Cash-out refinance activity also increased, rising 11% from December and 38% year over year.

Purchase lending showed more modest movement, rising 3% from December but remaining down 5% from a year earlier. Optimal Blue said this was due to a “slower response of purchase demand to changing rate conditions early in the year.”

Mortgage rates declined across most major products during the month. The Optimal Blue Mortgage Market Indices (OBMMI)’s 30-year conforming fixed rate fell 7 basis points to 6.07%. Jumbo rates declined 16 bps to 6.25%, while U.S. Department of Veterans Affairs (VA) rates dropped 7 bps to 5.64% and Federal Housing Administration (FHA) rates were largely unchanged at 5.99%.

The average locked rate on the Optimal Blue pricing engine fell below 6% for the first time since August 2022.

“January’s data shows just how quickly refinance demand can respond when rates move lower,” said Mike Vough, senior vice president of corporate strategy at Optimal Blue. “It’s been more than three years since the market last saw average rates with a ‘5 handle,’ and crossing back below that level appears to have released meaningful pent-up refinance demand.

“Purchase activity is responding more gradually, which is typical this early in the year, but the shift in borrower behavior is clear.”

On the secondary market side, the report found that lenders adjusted execution strategies as pricing dynamics shifted and investor demand strengthened.

“January’s secondary market data reflects lenders’ positioning early for a potentially more active origination environment,” Vough said. “Pricing trends were increasingly tied to eligibility rather than outright price give-ups, and agency MBS securitization reached its largest share since 2024. Meanwhile, rising MSR values and expanding investor participation point to a market focused on flexibility and long-term execution strategy as 2026 begins.”

Refinance activity made up a larger share of overall volume, while the nonqualified mortgage (non-QM) share declined to 8%, down 160 basis points from December but still 70 bps higher than a year earlier. VA lending gained share, accounting for 14% of locks, up 125 bps month over month and 212 bps year over year.

In terms of execution, lenders shifted more volume toward agency mortgage-backed securities. Their securitization share increased 300 basis points from December to 47%, its highest level since 2024. Sales to bulk aggregators and cash-window executions each declined by 100 bps. The number of active investors increased to 14, continuing a trend that began late last year, Optimal Blue said.

Borrower credit profiles improved across several categories. Average credit scores rose for both cash-out and rate-and-term refinances increased modestly across conforming, FHA and VA loans.

Affordability metrics also improved by 1 to 2 percentage points over the past year, with purchase debt-to-income ratios declining across all loan types. First-time homebuyers accounted for 45% of conforming purchase loans and 70% of FHA loans in January.

Average loan amounts increased to $400,667 in January, up from $394,502 in December. Loan sizes ranged from $868,498 in the Greater San Francisco area to $316,638 in San Antonio. Loan-to-value ratios ranged from 70.21% in Greater Los Angeles to 88.44% in San Antonio, with a national average of 80.06%.