Refinance activity surged in September, with rate-and-term refinance lock volume rising nearly 50% month-over-month and a whopping 700% year-over-year, according to report on mortgage trends from Optimal Blue, a provider of mortgage analytics.

The jump in refinancing activity was the result of homeowners taking advantage of the recent drop in rates to reduce their monthly payments. The September refinancing levels were the highest since January 2022. Refinancing had been increasing in recent months, but home purchasing activity had been stagnant, said Brennan O’Connell, director of data solutions at Optimal Blue. But September volume increases may indicate the tide is turning.

Other findings from the report included:

• Interest rates fall: According to Optimal Blue’s market data, interest rates for the 30-year conforming benchmark loan dropped 23 basis points in September, while jumbo, FHA and VA rates were down 22, 25, and 16 basis points respectively.
• Conventional and VA loans increased market share: Conforming loan production rose about 0.5% to 54.4% and the share of non-conforming loans, including jumbo and non-QM loans, rose a quarter of a percent to 12.6%. The share of loans backed by the U.S. Department of Veterans Affairs were up 0.2% to 13.7%, while Federal Housing Administration loans fell by about 1% to 18.7%.
• Average home loans and home prices continue to rise: Between August and September of this year, the average loan ticked up more than $11,000, rising from $372,400 to $383,700. At the same time, the average home price, which had been trending down for two months, rose about $10,000 to $475,800.