Optimal Blue: October Mortgage Lock Data Shows ‘Resilience;’ ‘Cracks’ in Mortgage Market
(Illustration courtesy of Optimal Blue)
Optimal Blue’s October Market Advantage report found strong purchase mortgage growth, though a shift away from conforming loans signals strained affordability.
Despite a 65-basis-point increase in the Optimal Blue Mortgage Market Indices 30-year conforming rate, purchase lock volume grew by 12% month over month, signaling strong demand among homebuyers. The report also found a “notable shift” away from conforming loans, indicating affordability concerns are pushing buyers toward alternative financing options.
“Despite a tough rate trajectory, we saw strong growth in both purchase lock volume and counts, which are both positive signals for mortgage production,” said Brennan O’Connell, director of data solutions at Optimal Blue. “While purchase growth is encouraging, signs of how buyers are adapting to higher rates indicate continued affordability pressures. Production mix data shows a shift from conforming loans to FHA and non-conforming products, which often offer more flexible financing terms.”
Key findings from the report, which Optimal Blue draws from direct-source mortgage lock data, include:
Rates rise across the board: The OBMMI 30-year conforming rate ended October at 6.79%, marking a 65-bps increase from September. FHA rates rose by 54 bps to 6.43%, while VA rates saw the largest increase, climbing 73 bps to 6.36%. The OBMMI jumbo index rate rose a more moderate 41 bps to end at 6.82%.
Purchase lock volume grows despite rate increases: Purchase lock volume rose 12% MoM. Also significant, purchase lock counts – which are a key measure for markethealth that excludes the impact of HPA and volatile refi activity – rose 9% year over year (YoY), continuing a positive trend that started in September. This increase in purchase locks reflects ongoing demand.
Affordability concerns shift production mix: Conforming loan share fell to its lowest point since tracking began in 2018, now representing 53% of volume. At the same time, FHA locks rose, accounting for one in five purchase transactions, as buyers sought more accessible financing options. Non-conforming loans also gained ground as borrowers leaned more heavily on non-QM and jumbo loans to adapt to affordability challenges.
Refinance demand softens: The rise in rates dampened refinance interest, with rate-and-term refinance volume dropping 45% MoM. Cash-out refinance activity saw a slight 6% increase, but the overall refinance share declined to 23% of total volume. With the exception of August and September 2024, refinance levels were still higher than any other month since April 2022.
Credit quality declines in refinance sector: Average credit scores remained high for purchase loans; however, refinance credit scores, particularly for rate-and-term refinances, saw a drop, with the average score declining by 6 points to 730.
Home prices trend upward while average loan amounts dip: October saw a second consecutive month of home price increases, with the average purchase price rising from $475.8K to $482.4K. Meanwhile, the average loan amount fell by $3.6K to $380.1K.
