US mortgage market sees purchase dominance as refinance applications slump in May 2026

Optimal Blue’s May 2026 Market Advantage report shows mortgage activity cooling amid higher rates. Total rate‑lock volume fell 9 % month‑over‑month but remained 7 % above a year earlier, with purchase loans accounting for just over 81 % of locks and refinance share dropping to 19 %, its lowest level since June 2025. The 30‑year conforming fixed‑rate rose to 6.44 % and the spread to the 10‑year Treasury widened to about 200 bps. Agency MBS executions slipped to 41 % of funded sales while cash executions rose to 32 %. Non‑qualified mortgages grew to 9 % of locks and adjustable‑rate mortgages (ARMs) represented 11 % of production, the highest share since October 2022.

The Mortgage Bankers Association’s Market Composite Index recorded a 5.5 % month‑over‑month decline in total mortgage applications, driven by a 12.3 % drop in refinance submissions, while purchase applications nudged up 1.8 %. Nonetheless, total applications were 14.2 % higher than a year earlier. ARM applications rose to 9 % of the total, up 0.7 percentage points from the prior month, and the average 30‑year fixed contract rate increased to 6.54 %. Average loan size edged up to $407,600, with purchase loans averaging $465,000 and refinance loans $321,000.