In the latest episode of Optimal Insights, Optimal Blue experts Jim Glennon, Alex Hebner, and James Cahill unpacked the market dynamics shaping the week ahead, followed by a Market Advantage data review from Mike Vough and Brennan O’Connell highlighting January 2026 performance.
Together, the conversation offers a view of where the mortgage and housing industry stands – and what deserves close attention next.
Here’s what you need to know this week.
Market Update: Volatility Without a Singular Catalyst
Current rate environment highlights:
The Optimal Blue Mortgage Market Index (OBMMI) for 30‑year conforming loans held near 6.08%, continuing a prolonged stay in the six‑handle range.
Treasury yields hovered around 4.2%, keeping mortgage‑Treasury spreads comparatively tight.
While short‑term rates have reacted to softer labor data, long‑term rates have shown limited downward pressure, reflecting ongoing debt issuance and macro uncertainty.
As Jim Glennon noted, under wider historical spreads, mortgage rates would likely be higher today – making current pricing comparatively constructive, even if not yet compelling enough to unlock broad demand.
Shifting Sentiment: From Growth to Durability
A recurring theme in the discussion was a rotation away from high‑growth, asset‑light trades toward more durable, asset‑backed sectors. While artificial intelligence investment remains substantial, capital markets appear to be reassessing timelines for return on investment.
Alex Hebner summarized the mood succinctly: markets feel as though they are “waiting for a catalyst.”
In the interim:
Tech‑heavy equities have cooled after significant capital expenditure announcements.
Value‑oriented and industrial sectors have drawn renewed interest.
Questions persist around private credit exposure and how risk is being priced across balance sheets.
For the mortgage market, this environment reinforces why long‑term rates have been resistant to sharp declines – even as economic data begins to soften at the margins.
The Data to Watch This Week
This week’s economic calendar carries meaningful implications for mortgage pricing and borrower psychology.
Key releases include:
Non‑Farm Payrolls (BLS): Expected to show modest job growth, with downside risk that could influence short‑term rate expectations.
Consumer Price Index (CPI): Consensus estimates around 2.5% year over year leave little margin for error. The team feels that any upside surprise could pressure rates higher.
Jim and Alex emphasized that estimates themselves can move markets. A CPI print that merely confirms recent trends may still provoke a reaction if it exceeds expectations.
Market Advantage Spotlight: January 2026 Mortgage Activity
A Strong Start to the Year
January data from the Market Advantage report suggests mortgage activity began 2026 with renewed momentum:
Rate lock volume increased 16% month over month and 36% year over year.
Refinance locks surged 50% month over month and 400% year over year, reflecting borrowers’ sensitivity to even modest rate rallies.
Cash‑out refinances also advanced, up 11% from December.
Purchase activity lagged slightly, down 3% month over month and 5% year over year – likely influenced by seasonal factors and severe winter weather rather than a structural slowdown.
The Return of the “Five Handle”
As noted by Brennan O’Connell, one of the most consequential developments in January was psychological rather than dramatic.
For the first time since August 2022, the average rate lock across all products and geographies dipped below 6%. While headline rates remain near 6%, this milestone matters.
Why it matters for the mortgage market:
Borrowers anchored to the “lock‑in effect” often wait for a five‑handle before re‑engaging.
Combined with temporary buydowns or adjustable‑rate products, sub‑6% averages can materially improve affordability.
Early refi activity – particularly among VA borrowers – suggests rate‑sensitive segments are already responding.
Mike Vough and Brennan O’Connell noted that the VA refinance channel, in particular, tends to react quickly to rallies, with implications for prepayment speeds and servicing valuations in the months ahead.
Secondary Market Signals: Demand Is Broadening
Secondary market data painted a cautiously optimistic picture:
Best‑efforts to mandatory spreads widened, incentivizing lenders to hedge loans internally.
The share of loans securitized into MBS rose to 47%, the highest level since early 2024.
The average number of investors participating in loan sales increased from 12 to 14, signaling deeper demand for agency paper.
Servicing values edged higher, even as rates declined – suggesting renewed confidence in retention strategies and long‑term asset value.
Collectively, these trends point to a healthier competitive landscape, with potential downstream benefits for borrower pricing if sustained.
Actionable Takeaways for Mortgage Professionals
Monitor borrower readiness: Rate psychology remains powerful. Even incremental improvements can prompt engagement.
Prepare for volatility: Economic data this week could shift short‑term pricing expectations quickly.
Leverage product flexibility: ARMs, buydowns, and VA options are gaining relevance in a sub‑6% average environment.
Stay attuned to investor behavior: Expanding secondary demand may create opportunities to optimize execution and margins.
January’s mortgage data and early‑year market signals suggest a recalibration is underway.
For a deeper exploration of these trends and insights, listen to the full episode of Optimal Insights.
Available on all major podcast platforms: https://optimal-insights.captivate.fm/listen
The views and opinions expressed in this program are those of the speakers and do not necessarily reflect the views or positions of Optimal Blue, LLC.