PLANO, Texas — Mortgage rate-lock activity fell sharply in October as borrowers increasingly turned to adjustable-rate mortgages and government-backed loans to contend with housing affordability pressures, according to a new report from Optimal Blue.
The mortgage technology company said lock volume declined 19% from September and 38% from a year earlier. Adjustable-rate mortgages accounted for 17% of locks, up from 14% in September and the highest share recorded in the company’s Market Advantage dataset, which dates to 2019.
Purchase mortgages accounted for 84% of October locks, while refinancing represented 16%, a decline of nearly 21 percentage points from a year earlier.
“October’s data show how much affordability is shaping the purchase market,” said Brennan O’Connell, director of data solutions at Optimal Blue. “ARM share reached another high, FHA gained share and first-time buyers took a larger share across the major agency programs.”
Rates and First-Time Buyers
Optimal Blue said its 30-year conforming fixed mortgage rate index ended October at 7.15%, down 24 basis points from September but 99 basis points higher than a year earlier. Federal Housing Administration loan rates ended the month at 7.00%, while Department of Veterans Affairs rates stood at 6.76%.
FHA loans represented 20% of October production, an increase of 153 basis points from September. First-time buyers accounted for 45% of conforming purchase locks, up 266 basis points year over year, and 70% of FHA locks.
The average locked loan amount declined 3% from September to $384,000.
Secondary Market Shifts
The report also found changes in how lenders managed interest rate risk and sold loans. The spread between best-efforts and mandatory pricing on conventional 30-year loans widened 15 basis points to 41 basis points. The comparable spread on government loans increased 8 basis points to 18 basis points.
“The jump in best-efforts-to-mandatory spreads shows investors are paying lenders more to take on interest rate risk,” said Mike Vough, Optimal Blue’s senior vice president of corporate strategy.
The 6.0 mortgage-backed securities coupon accounted for 57% of lender hedges, compared with 44% in September. Mortgage-backed securities execution fell to 43% of hedged loan sales, while the share of loans sold with servicing retained declined to 53% from 56%.
Mortgage servicing rights values for conforming 30-year loans increased 2 basis points to 1.41%, the company reported.
Projection for 30-Year Mortgage
Optimal Blue projected the 30-year conforming mortgage rate would reach 7.30% over the next month and 7.39% over three months before easing to 7.24% over 12 months. Those figures are forecasts, not guaranteed future rates.
The findings were published in Optimal Blue’s October 2026 Market Advantage report.
