If you bought a home in the last two years when mortgage rates were soaring above 7%, you may finally have an opportunity to break free from those high monthly payments.
A wave of homeowners is jumping on the chance to refinance, leading to a massive 40% surge in rate-and-term refinances in February, according to Optimal Blue’s February 2025 Market Advantage mortgage data report.
Verify your refinance eligibility. Start hereRefinancing activity surges as rates improve
Many homeowners who felt stuck with high-interest loans are now seeing an opening to secure a lower rate and reduce their monthly costs. This surge in refinancing helped drive a 7% overall increase in mortgage lock volume last month.
Cash-out refinances also increased as homeowners sought to tap into their home equity, while purchase lock activity remained sluggish for the second straight month. On a year-over-year basis, purchase lock volume declined 5%, and when adjusted for home-price appreciation, purchase lock counts dropped 9%.
“Interest rate improvement, while marginal, is attracting refinance activity as homeowners who bought at higher rates work the numbers and find they can reduce their monthly payments or tap into home equity,” said Brennan O’Connell, director of data solutions at Optimal Blue.
“The upcoming homebuying season will reveal whether purchase demand is poised for a rebound or if elevated rates will continue to keep buyers on the sidelines.”
Conforming loan volume on the rise
Following a multiyear low in December, conforming loan volume continued its upward trend for the second consecutive month, now comprising 52% of total lock volume.
The Federal Housing Administration (FHA) share remained slightly above 20%, while the Department of Veterans Affairs (VA) share saw modest growth to 11.5%. Meanwhile, non-conforming loan volume—including jumbo and non-QM loans—held steady at 15.5%.
The report also highlighted that the mortgage rate spread with the 10-year Treasury stood at just over 230 basis points. This marks a 30 basis-point improvement from February 2024 but remains 30 to 40 basis points above the long-term average.
Time to make a move? Let us find the right mortgage for youBorrower credit scores rise for refis
Other key findings from the report include a rise in credit scores for refinances. The average credit score for rate-and-term refinances increased by four points to 732, while cash-out refinance credit scores rose by two points to 695. The average purchase credit score remained unchanged at 737.
Home prices and loan amounts also saw upward movement. The average home purchase price climbed from $476,200 in January to $480,200 in February, driving a corresponding increase in the average loan amount from $376,400 to $380,500.
At the metropolitan level, New York City accounted for 4.6% of total lock volume in February, though this figure represented a 5.3% decrease from January. In contrast, Washington, D.C. showed notable growth, with lock volume rising by 15.9% month over month to 3.6% of total volume.
The bottom line
If you bought your home when rates were above 7%, now might be your best shot at locking in a better deal.
A rate-and-term refinance could mean saving a few hundred dollars a month, giving you some extra breathing room in your budget to put toward savings, home improvements, or paying down other debts. Over time, those savings can add up to thousands of dollars, making a significant difference in your financial future.
With rates showing some improvement, it’s worth reaching out to a lender to see what your options are—before things shift again. You’ve got nothing to lose by exploring what a refinance could do for you.
