PLANO, Texas — Mortgage activity slowed in May as rising interest rates weighed on both purchase and refinance demand, although purchase mortgages continued to account for the vast majority of lending activity, according to Optimal Blue’s latest Market Advantage mortgage data report.
Optimal Blue reported that total mortgage rate-lock volume fell 9% from April but remained 7% above year-earlier levels. Purchase loans represented just over 81% of all lock volume during the month, while refinance activity accounted for 19%, its lowest share since June 2025.
The slowdown coincided with higher borrowing costs. The Optimal Blue Mortgage Market Indices (OBMMI) 30-year conforming fixed mortgage rate increased 13 basis points in May to 6.44%. The 10-year Treasury yield rose 5 basis points to 4.45%, while the spread between mortgage rates and Treasury yields widened to just under 200 basis points.
The Loan Purpose Leader
“Purchase activity continues to be the loan purpose leader in spite of affordability pressures,” Mike Vough, senior vice president of corporate strategy at Optimal Blue, said in a statement. “More than four out of five mortgage locks were tied to purchase transactions in May, but the more notable shift may be what happened after borrowers locked. Pull-through rates declined across both purchase and refinance pipelines, which tells us borrowers are closely monitoring changes in the rate market.”
The report also found shifting trends in the secondary mortgage market. Agency mortgage-backed securities (MBS) executions declined to 41% of funded loan sales in May, while cash executions increased to 32%. Mortgage servicing rights (MSRs) for conforming 30-year loans increased 7 basis points to 1.36%, representing a 5.44 multiple.
“We saw lenders continue to balance different execution options during May,” Vough said. “Agency MBS share declined while cash executions gained ground, reflecting the impact of agency execution strategies and/or specified pay-up impacts.”
Volume Trends and Market Composition
Among the report’s key findings:
- Refinance share fell to 19% of total lock volume, its lowest level since June 2025
- Rate-and-term refinance volume declined 34% from April but remained 46% above year-earlier levels
- Cash-out refinance volume dropped 13% month over month but was still 7% higher than a year earlier
- Purchase loan volume fell 5% from April but remained 3% above May 2025 levels
- Conforming loans accounted for just under 49% of total lock volume, extending a decline that pushed the category below 50% for the first time in April
- FHA loans represented 19% of lock volume, non-conforming loans 19%, VA loans 13% and USDA loans 1%
- Non-qualified mortgage (non-QM) loans grew to 9% of total lock volume, up 83 basis points from April and 207 basis points from a year ago
- Adjustable-rate mortgages accounted for 11% of total production, the highest level since October 2022 outside of March 2026.
- Single-family homes represented 64% of production, while planned unit developments accounted for 28% and condominiums 6%.
Rates and Pricing
- The OBMMI 30-year conforming fixed rate rose to 6.44%.
- Jumbo mortgage rates increased 27 basis points to 6.70%.
- FHA rates rose 21 basis points to 6.27%
- VA rates increased 15 basis points to 6.06%.
- Mortgage servicing rights values increased to 1.36%.
- Best-efforts-to-mandatory spreads remained at 39 basis points for conventional 30-year loans and increased to 47 basis points for conventional 15-year loans.
- The share of loans sold at the highest pricing tier declined 208 basis points to 77%.
Channel and Execution Trends
- Hedged loan sales into agency MBS fell 349 basis points to 41% of funded loan sales
- Cash executions increased 362 basis points to 32%
- Investor participation declined to 14 investors after reaching 15 in April.
Borrower Profiles and Pipeline Performance
- First-time homebuyers accounted for 44% of conforming purchase locks, 70% of FHA purchase locks and 44% of VA purchase locks, all modest declines from April
- Debt-to-income ratios remained relatively stable, averaging 36.4% for conforming loans, 43.6% for FHA loans and 42.8% for VA loans
- Average purchase credit scores held steady at 731. Conforming borrowers averaged 754, FHA borrowers averaged 677 and VA borrowers averaged 715
- Purchase pull-through rates fell 539 basis points from April to 76.7% and were down 636 basis points from a year earlier.
- Refinance pull-through rates dropped 1,332 basis points month over month to 65.3%, though they remained 304 basis points above year-earlier levels.
- The average locked loan amount increased to $395,536 from $394,046 in April.
- Average loan-to-value ratios were 81.6%.
- Average loan balances ranged from $917,568 in the greater San Francisco market to $307,833 in Cincinnati.
- Regional loan-to-value ratios ranged from 68.7% in greater San Francisco to 89.1% in San Antonio.
