Refinance activity maintained strong momentum from December to January as purchase activity proved slow off the blocks to start 2026, despite sustained improvements in borrowing costs.
Rate-and-term refinance lock volumes rose 50% over the month to land more than four times higher year over year in January, according to mortgage technology provider Optimal Blue. Cash-out refinance activity climbed 11% over the month and 38% annually.
The company’s Market Advantage mortgage data report for January showed overall rate-lock volumes rose 16% over the month to finish January 36% higher year over year, building upon the 30% annual growth in December, also fueled by refinance gains.
A rate lock is an agreement between a borrower and a lender that the interest rate on a loan will remain fixed during the loan processing period. Optimal Blue says its rate-lock data represents about 35% of all mortgage transactions nationwide.
Purchase lock volumes rose 3% monthly but remained about 5% below year-ago levels after December purchase activity had been 7% higher year over year. Optimal Blue’s report suggests homebuyers remained largely on the sidelines of the housing market last month.
“The slower response reflects the typical lag in purchase demand relative to rate movements, particularly early in the year,” indicated Optimal Blue’s report. Purchase activity was down more than 20% in January compared to the previous three months’ of trended rate-lock data.
Nevertheless, average rates for 30-year fixed-rate mortgages held in a tight range around 6.1% last month, according to Freddie Mac data, down about 80 basis points from around 6.9% a year ago. Though that represents a notable increase in purchasing power for homebuyers, elevated home price-to-income ratios underscore persistent affordability challenges in 2026.
Optimal Blue says its 30-year conforming interest rate ended January at 6.07%, down just seven basis points over the month. Refinance locks accounted for 44% of all mortgage activity in January, up nearly 7% from December, while the average loan amount increased to $400,667 from $394,502 the previous month.
Across loan products, government mortgages backed by the Federal Housing Administration slipped 1.6% over the month and 3.6% over the year in January to comprise around 17.3% of overall lock activity. Loans backed by the Department of Veterans Affairs saw modest growth, rising 1.2% from December and 2.1% from a year ago.
Conventional conforming activity increased nearly 2% monthly and 1.5% annually to make up about 53% of overall lock activity, while conventional nonconforming loans made up around 15.5% of January volumes, down 1.6% monthly and up 0.04% from year-ago levels.
