Lenders retained servicing rights on 57% of August volume — up from 53% the prior two months — as tighter execution spreads and rising MSR values reshaped the sell/retain calculus, even as August lock volume fell across the board on a 47% annual drop in rate-and-term refis, Optimal Blue said.
While conforming rates as tracked by Optimal Blue were 28 basis points higher
Primary-secondary spreads are expected to narrow going forward, but not by much.
Rate lock activity at an eight-month low
Its market volume index of 96 was the first time the value was under the 100 benchmark
Purchase lock activity was down
But the biggest drop was in rate and term refinancings, which had 12.6% less activity versus July besides
Yet refi share on a month-to-month basis was 40 basis points to 19%. The annual change however was a 684 basis point reduction in share.
Did rates flattening help volume in August
Rates leveling off in August did not create stronger volume, said Brennan O'Connell, director of data solutions at Optimal Blue in a press release. The conforming 30-year fixed was unchanged versus July.
"Purchase activity is still running ahead of last year, but with rate-and-term refinance volume down 47%, there just isn't much refinance demand to support the broader market," O'Connell said. "With rates still elevated and our 12-month forecast pointing to only gradual relief, the market remains highly sensitive to even modest changes in borrowing costs."
Pull-through rates for refinancings were much improved, although this data did not distinguish by type. The current rate of 72.8% was 289 basis points over July and 1,184 basis points over August 2025.
Purchase pull-through of 84.9% had a much better improvement versus July at 597 basis points, but was relatively flat compared with one year, with a 68 basis point gain.
As of the end of August, the 30-year conforming was at 6.72% and the 10-year Treasury at 4.75%, creating a 197 basis point spread. This was 2 basis points lower versus three months prior, but a substantial reduction of 30 basis points versus Aug. 25.
What is the outlook for rates and spreads?
Optimal Blue employs an artificial intelligence "virtual economist" to help with rate forecasts. In the August report, it expects rates to rise 2 basis points this month, by 10 basis points at the end of three months, before falling to 6.51% by August 2027.
However, this activity will have minimal effect on the primary-secondary spread, which for August was at 109 basis points. Optimal Blue projects a 104 basis point spread for September. This will go down to 103 by the end of November, but back up to 104 for next August.
Secondary market sales with the servicing rights retained made up 57% of August volume, up from the 53% share it had been at for the prior two months.
"We saw a mixed secondary-market picture in August, with tighter execution spreads and higher MSR values alongside some deterioration in top-tier execution share," said Mike Vough, Optimal Blue's senior vice president of corporate strategy.
