Adjustable-rate mortgages accounted for 14 percent of rate locks in September, up from 10.5 percent in August and the highest share in the data Optimal Blue has collected since 2019, the company said in its September 2026 Market Advantage report, released Oct. 13. Loans outside the qualified-mortgage box grew too, even as overall lending shrank.
The backdrop is a 30-year rate that keeps climbing. Optimal Blue’s conforming 30-year index ended September at 7.39 percent, 67 basis points higher than at the end of August and 107 basis points above a year earlier, with the 10-year Treasury finishing the month at 5.29 percent. Jumbo ended at 7.36 percent, FHA at 7.10 percent and VA at 7.08 percent.
Total lock volume fell 2 percent from August, 21 percent over three months and 26 percent from September 2025. What is left of the market is changing shape rather than simply getting smaller.
Borrowers are trading rate certainty for a lower payment
The ARM move is the clearest signal. A jump from 10.5 percent to 14 percent of locks in a single month is a sizable shift in borrower behavior, and on our reading it is arithmetic rather than sentiment: when the 30-year fixed is near 7.4 percent, the initial-rate discount on an adjustable loan can be the difference between qualifying and not qualifying. One caveat on the superlative β Optimal Blue’s series only reaches back to 2019, so the record is a seven-year one, not a historical high for the product.
Non-QM lending followed the same logic. Non-QM lock volume rose 8 percent from August β in a month when everything else fell β and reached 12 percent of September production, up 117 basis points from August and 478 basis points from a year earlier. Within that segment, investor and debt-service-coverage-ratio loans made up 33 percent, bank-statement loans 30 percent, and other expanded-guideline programs the remaining 37 percent.
That composition is worth reading closely. On our reading, investor/DSCR and bank-statement products are not subprime relics; they are underwriting paths for borrowers whose income is real but does not fit agency documentation β landlords, self-employed buyers, contractors. Their growing share says less about credit loosening than about who can still transact at these rates. The report’s credit metrics support that: the average credit score across all locks was about 731, purchase locks averaged about 736, and average loan-to-value stayed just above 80 percent. The average locked loan amount was roughly $397,000, up more than 2 percent from August.
Refinancing has effectively stopped
Purchase locks were 82 percent of volume, down less than 1 percent both from August and from a year earlier β remarkably stable in a falling market. Refinancing made up the other 18 percent, and the detail there is stark: cash-out refinances fell 8 percent from August and 23 percent year over year, while rate-and-term refinances fell 13 percent on the month and 82 percent from a year ago.
An 82 percent annual decline in rate-and-term activity is what a market looks like when almost nobody has a reason to refinance for rate. The lock-in effect is the straightforward explanation β borrowers holding pandemic-era loans are not trading them for a 7 percent handle β and the only refinance business still moving is equity extraction, which is itself shrinking. The same pattern was visible a month earlier, when locks fell 9 percent in August and rate-and-term refis dropped 47 percent.
What lenders are doing with the paper
The report also shows secondary-market behavior adjusting to higher coupons. Hedging shifted up the stack: the UM30 5.5 coupon fell from 62 percent of hedges to 50 percent while the UM30 6.0 rose to 44 percent. Sales through mortgage-backed securities execution rose to 47 percent of hedged loan sales, which Optimal Blue said was the highest since January 2026, and the servicing-retained share slipped to 56 percent from 57 percent.
Optimal Blue’s own forecasting tool, which it calls the Virtual Economist, projects the conforming 30-year rate at 7.85 percent over the next 12 months, with further increases expected. That is the company’s model, not a consensus view, and it runs in the same direction as Fed policy: minutes released Oct. 7 showed most FOMC participants expecting another increase by year end, and discount-rate minutes published Oct. 13 showed four Reserve bank boards pushing for a higher rate before September’s hike.
For agents and loan officers, the practical read is that the product conversation has changed. A buyer who could not clear a 7.4 percent fixed payment in September was not necessarily walking away β a growing number were signing an ARM or a bank-statement loan instead, and the volume data suggests lenders are increasingly willing to write them. Whether that holds depends on where rates go; the refinance pipeline has already halved against last year’s pace. More lending coverage is on our Mortgage page.
