Optimal Blue report: Rising rates cool July mortgage activity, but demand remains above year-ago levels

- July Market Advantage report debuts 12-month rate and spread forecasts powered by Virtual Economist, plus three new capital markets metrics -

PLANO, Texas, Aug. 11, 2026 (SEND2PRESS NEWSWIRE) — Optimal Blue today released its July 2026 Market Advantage mortgage data report, which found that mortgage activity softened as rising rates weighed on both purchase and refinance demand. Total rate-lock volume declined 11% month over month (MoM) but remained 5% above July 2025. Purchase lock volume fell 12% from June but remained 6% higher year over year (YoY), with purchase loans accounting for more than 81% of total lock volume. Refinance share ended the month at nearly 19% of total production.

Mortgage rates moved higher across all major products in July. The Optimal Blue Mortgage Market Indices (OBMMI) 30-year conforming fixed rate, the benchmark for CME Group’s Mortgage Rate futures, rose 26 basis points (bps) MoM to 6.72%, essentially unchanged from a year ago. The 10-year Treasury yield climbed 31 bps to 4.75%, while the spread between the 10-year Treasury and the OBMMI 30-year conforming rate narrowed 5 bps to 197 bps.

The July report debuts a new 12-month rate and spread forecast powered by Virtual Economist, the mortgage industry’s first and only AI- and machine learning-powered forecasting tool that combines public economic data and Optimal Blue’s proprietary lock volume data to deliver real-time rate and market volume forecasts. The July forecast projects the OBMMI 30-year conforming fixed rate will moderate toward the mid-6% range by mid-2027.

“July was a clear reminder of how sensitive this market remains to rate movement,” said Mike Vough, senior vice president of corporate strategy at Optimal Blue. “A 26-basis-point rate increase was enough to pull both purchase and refinance volume meaningfully below June’s pace. The market is still outperforming last year, but momentum remains fragile and highly dependent on where rates move next.”

On the secondary side, execution spreads tightened modestly across major products, with best-efforts-to-mandatory spreads for conventional 30-year products narrowing 1 bp to 30 bps while government 30-year spreads tightened 2 bps to 16 bps. Mortgage servicing rights (MSRs) for conforming 30-year loans increased 2 bps to 1.34%, moving in line with rates. The share of loans sold at the highest price tier improved 128 bps to 79%.

The July report also introduces three new secondary market datasets sourced from Optimal Blue’s CompassEdge hedging and loan trading platform: spec-eligible pipeline share, loan pipeline versus hedge alignment and MSR retention versus release strategy mix.

“MSR valuations increasing and top-tier executions improving share are two constructive signals in an otherwise challenging month,” Vough said. “The new pipeline-to-hedge alignment data show lenders using the UM30 5.5 as their primary hedge, accounting for 67% of hedges, while 35% of production is slotting into the 5.5 coupon and 24% into the 6.0 coupon. That gap between where risk sits and how it is being hedged gives capital markets desks the visibility they need to manage execution more precisely.”

Key findings from the Market Advantage report include:

VOLUME TRENDS AND MARKET COMPOSITION

• Refi activity retreats: Refinance share ended the month at nearly 19% of total production. Rate-and-term refinance volume declined 17% MoM but remained 3% above July 2025 levels. Cash-out refinance volume fell 5% MoM and was essentially unchanged from a year ago.
• Purchase activity cools: Purchase lock volume fell 12% from June but remained 6% higher YoY. Purchase loans accounted for more than 81% of total lock volume in July.
• Conforming share keeps shrinking: Conforming share declined to 47% of total production, down 135 bps from June and nearly 5 percentage points from a year ago. Non-conforming share expanded to nearly 21% of volume. FHA represented 19% of production while VA loans accounted for more than 12%.
• Non-QM growth continues: Non-qualified mortgage loans accounted for more than 10% of total lock volume in July, up 1.4 percentage points MoM and more than 2 percentage points from a year ago. Investor and debt service coverage ratio (DSCR) loans represented more than a third of non-QM production, bank statement loans accounted for more than 30% and all other expanded guideline products made up the remaining 36%.
• ARMs stay elevated: Adjustable-rate mortgages accounted for more than 11% of lock volume in July, remaining above the 10% range that characterized much of 2025.
• New construction holds strong: Planned unit developments (PUDs), a proxy for new construction activity, increased to 29% of total volume. Single-family detached homes remained the dominant property type at 63% of production.

RATES AND PRICING

• Rates rise on all products: The OBMMI 30-year conforming fixed rate rose 26 bps MoM to 6.72%, essentially unchanged from a year ago. The 10-year Treasury yield climbed 31 bps to 4.75%. The spread between the 10-year Treasury and the OBMMI 30-year conforming rate narrowed 5 bps to 197 bps.
• MSRs move with rates: MSRs for conforming 30-year loans increased 2 bps to 1.34%, representing a 5.38 multiple.
• Top-tier executions improve: The share of loans sold at the highest price tier increased 128 bps to 79%. Loans sold at the second-ranked price tier declined 115 bps to 11%, while third-ranked executions were essentially unchanged at 3%. Fourth-tier or lower executions declined 16 bps to 6%.

MARKET OUTLOOK

• Rates to ease over 12 months: The OBMMI 30-year conforming fixed rate is forecast at 6.72% over the next month and 6.76% over three months before moderating to 6.58% over the 12-month horizon.
• Primary-secondary spread to narrow: The primary-secondary spread is forecast to narrow to 0.94% over the next month before widening to 1.03% over three months and 1.06% over 12 months, returning toward historical norms.

CHANNEL AND EXECUTION

• Hedged loan sales hold steady: The share of hedged loan sales to agency mortgage-backed securities (MBS) was essentially unchanged in July.
• Execution spreads tighten: Best-efforts-to-mandatory spreads for conventional 30-year products narrowed 1 bp to 30 bps. Government 30-year spreads tightened 2 bps to 16 bps. Conventional 15-year spreads tightened 2 bps to 41 bps.
• Spec-eligible share edges lower: The share of a lender’s pipeline eligible for specified pool delivery declined from 81% to 80% in July, with the largest drop in the $150,000 to $250,000 unpaid principal balance range.
• UM30 5.5 remains the dominant hedge: Lenders used the UM30 5.5 as the predominant hedging instrument, accounting for 67% of hedges, while 35% of production is slotting into the 5.5 coupon and 24% into the 6.0 coupon.
• Servicing retention holds steady: The share of loans sold with servicing retained remained at 53% in July, down 700 bps from January 2026.
• Investor participation declines: Investor count declined from 14 to 13 in July, the lowest level since December 2025.

PRODUCT MIX AND BORROWER PROFILES

• Conforming first-time buyer share softens: First-time homebuyers accounted for 44% of conforming purchase locks in July, down 1 percentage point from June. FHA first-time homebuyer increased modestly to 70% from June’s 69%.
• DTIs stabilize: Purchase debt-to-income (DTI) ratios held below year-ago levels across all major products: conforming borrowers at 36.7%, FHA at 43.5% and VA at 43.1%.
• Credit quality remains strong: The average credit score across all locks nationwide was 730, ranging across top metros from 761 in the San Francisco Bay Area to 715 in San Antonio. Meanwhile, across the nation, the average purchase credit score was 735. For rate-and-term refinances, the average credit score was 737; cash-out refinances saw an average credit score of 696. Conforming borrowers averaged a score of 753, VA borrowers 716 and FHA borrowers 676.
• Pull-through weakens: Purchase pull-through declined 2.4 percentage points to 78.9% in July. Refinance pull-through fell 1.2 percentage points to 69.9%.
• Loan amounts dip: The average locked loan amount declined to just over $395,000 in July from nearly $399,000 in June. Average loan-to-value (LTV) ratios nationwide were 81.0%, ranging from 70.0% in the greater Los Angeles area to 88.4% in San Antonio.

To view the full July 2026 Market Advantage report, complete the free subscription form: https://engage.optimalblue.com/market-advantage.

Subscribers receive a report PDF each month with the latest data. Members of the press are eligible for special, advance access each month and should contact Alexandra Kreuter to be added to the media list.

ABOUT THE MARKET ADVANTAGE DATA REPORT

Optimal Blue issues the Market Advantage mortgage data report each month to provide insight into U.S. mortgage trends and drivers of lending profitability. Data is sourced from the Optimal Blue PPE, which is used to price and lock more than one-third of all mortgages nationwide, and Optimal Blue’s hedging and loan trading system, which supports approximately 40% of loans hedged and sold into the secondary market. The report also includes forward-looking rate and spread forecasts generated by Virtual Economist, an AI- and machine learning-powered forecasting tool built on public economic data and Optimal Blue’s proprietary lock volume data. As the leader in mortgage capital markets technology, Optimal Blue has a direct view of both origination and secondary market activity and the interconnectedness of the two. Unlike self-reported survey data, Optimal Blue’s direct-source data accurately reflect the in-process loans in lenders’ pipelines and secondary market executions. Visit Optimal Blue’s website to subscribe to receive the free report each month.

Nothing herein shall be construed as, nor is Optimal Blue providing, any legal, trading, hedging or financial advice.

ABOUT OPTIMAL BLUE

Optimal Blue powers strategic performance across the mortgage capital markets ecosystem. As the industry’s only end-to-end capital markets platform, our technology, data and integrations bridge the primary and secondary markets to help lenders of all sizes optimize performance – from pricing accuracy to margin protection and every step in between. Backed by over 20 years of proven expertise, our modern, cloud-native technology delivers the real-time automation, actionable data and seamless connectivity lenders need to navigate market volatility and scale for growth. To learn more about how Optimal Blue helps deliver measurable ROI, visit https://OptimalBlue.com/.

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Image caption: Optimal Blue’s July 2026 Market Advantage mortgage data report

NEWS SOURCE: Optimal Blue

Keywords: Mortgage, Optimal Blue July 2026 Market Advantage report, Virtual Economist, mortgage AI, capital markets, housing reports, PLANO, Texas

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