Refinancing activity spiked in December despite higher interest rates, Optimal Blue reported on Wednesday. The refinance share represented nearly a quarter of mortgage volume in the month, the highest since September and the third most in 2024.

The volume was driven by a surge in rate-and-term refinance locks, which were up 33% over the month. Cash-out refinance declined by 3%. Meanwhile, purchase volume declined 13% over the month due to a normal seasonal dip in buyer activity.

The higher volume of finances came as interest rates increased. The 30-year-rate for loans meeting the requirements of the government-sponsored enterprises Fannie Mae and Freddie Mac ended December at 6.83%, up 16 basis points compared to November.

 Federal Housing Administration and Veterans Affairs loan rates were also up, while jumbo rates fell slightly, according to Optimal Blue.

Year-over-year, December mortgage lock volume increased 26%, driven by an 18% increase in purchase locks, a 43% rise in cash-out refinances and 82% jump in rate-and-term refinances, Optimal Blue reported.

The growth “reflects resilience and an increasing demand for refinance opportunities driven by rate adjustments,” said Brennan O’Connell, director of data solutions at Optimal Blue.

Conforming, GSE-eligible loans continue to lose market share to FHA, VA and non-conforming loans, Optimal Blue reported.  

The share of conforming loans declined to 51% in December and has hovered around a historic low for the past five months.