Mortgage rates fell to their lowest levels of 2025 just as the year was coming to a close in the last week of December. Borrowers, new data shows, jumped on the savings.

An early look at mortgage activity last month shows rate-and-term refinance lock volumes jumped 13% from November and 170% from a year ago, with a much lower 1% monthly gain in cash-out refinance locks, according to mortgage technology provider Optimal Blue.

The company’s Market Advantage mortgage data report for December showed overall lock volumes rose 2% over the month to land 30% higher than last December.

The refinance share of activity expanded by 2.24% over the month, “defying typical holiday slowdowns” the report indicated, as purchase locks declined by 1% over the month, finishing 7% higher than a year ago.

Housing economists at Redfin have forecast refinance volumes rising as much as 30% in 2026, while the Mortgage Bankers Association (MBA) says refinance volumes could exceed the $700 billion threshold on anticipated easing in mortgage rates.

Purchase volumes in 2026 are expected to rise marginally from near-decade lows in 2023, 2024 and 2025. Driving profitability for lenders, periodic dips in mortgage rates are expected to attract recent borrowers with higher-note mortgages seeking to capture savings through refinances, offsetting low purchase counts.

A taste of that trend emerged in the last half of 2025, when average 30-year fixed-mortgage rates dropped from 6.75% in mid-July to 6.26% in mid-September, according to Freddie Mac data, shedding about 50 basis points on weak economic data and an anticipated Federal Reserve rate cut that sent homebuying affordability to its best levels since 2023.

The rate rally led to a surge in refinance volume that made September 2025 the strongest month for refinance activity in more than two years, Optimal Blue reported at the time.

While December refinance activity helped boost annual totals for the year, rate-and-term refinances were 36% lower in December than over the preceding three months, while cash-out refinances were 13.3% lower over that period. Total rate locks were 26.7% lower.

Average credit scores were 15 points higher for rate-and-term refinances in December compared to a year ago and five points higher for cash-out borrowers, while remaining flat from November.

The 30-year conforming interest rate ended December flat at 6.14%, according to Optimal Blue’s Mortgage Market Indices.