Optimal Blue data shows FHA gaining share and first-time buyers at 45% of conforming purchase locks amid falling volume
Mortgage rate-lock volume dropped 19% from September in October and fell 38% year over year, as elevated borrowing costs continued to push buyers toward adjustable-rate products and government programs, according to Optimal Blue’s October 2026 Market Advantage report.
Adjustable-rate mortgages (ARMs) claimed 17% of total lock volume last month, up from 14% in September and the highest share in Optimal Blue’s Market Advantage dataset, which goes back to 2019.
The result extended a year-long trend: ARM demand that had already hit near a four-year high earlier in 2026 continued to accelerate as fixed-rate costs climbed.
Purchase loans made up 84% of all locks, while refinance share fell to 16% of total production, down nearly 21 percentage points year over year.
“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. For lenders, that means the opportunity is increasingly in helping borrowers find the product and payment structure that works for their circumstances.”
Government programs and first-time buyers gain ground
The Optimal Blue Mortgage Market Indices (OBMMI) 30-year conforming fixed rate, the benchmark for CME Group’s Mortgage Rate futures, ended October at 7.15%, down 24 basis points (bps) month over month but up 99 bps year over year.
Federal Housing Administration (FHA) loans priced at 7.00%, while US Department of Veterans Affairs (VA) loans closed the month at 6.76%.
FHA share climbed 153 bps from September to 20% of October production.
Satyan Merchant of TransUnion says mortgage delinquencies have edged above pre-pandemic levels, with FHA loans driving much of the increase while employment and home equity remain key supports for borrowers. https://t.co/xcjrHzUkFm
— Mortgage Professional America Magazine (@MPAMagazineUS) November 10, 2026
First-time homebuyers represented 45% of conforming purchase locks, a 266-bps year-over-year gain, and 70% of FHA locks.
With brokers turning to adjustable-rate mortgages as the rate gap widened through the year, the average locked loan amount fell 3% from September to $384,000.
For brokers navigating rate volatility, locking discipline has been a constant refrain.
Kurt Strandson, president and CEO of Pinnacle Mortgage in New Hampshire, told Mortgage Professional America earlier in 2026: “If the loan makes sense, lock your loan, live to see another day. The advantage of being a broker, we work with at our company over 90 different investors. You can relock a loan if it goes down, but you can’t get yesterday’s rates.”
Secondary market spreads widen as hedging shifts
Best-efforts-to-mandatory spreads on conventional 30-year products widened 15 bps to 41 bps during October. Government 30-year spreads rose 8 bps to 18 bps.
“The jump in best-efforts-to-mandatory spreads shows investors are paying lenders more to take on interest rate risk. That makes best-efforts execution more expensive and a well-managed mandatory pipeline more valuable,” said Mike Vough, senior vice president of corporate strategy at Optimal Blue.
“Hedges moved quickly to the 6.0 coupon, but production is split between the 6.0 and 6.5, so lenders should confirm their hedges match where loans are slotting. With MSR values barely moving, more lenders also chose to release servicing.”
The UM30 6.0 coupon accounted for 57% of lender hedges, up from 44% in September.
Mortgage-backed securities (MBS) execution fell to 43% of hedged loan sales, and the share of loans sold with servicing retained declined to 53% from 56%.
Mortgage servicing rights (MSRs) for conforming 30-year loans ticked up 2 bps to 1.41%.
With mortgage rates set to rise as October CPI tops forecasts, Optimal Blue projects the 30-year conforming rate at 7.30% over the next month and 7.39% over three months, before easing to 7.24% over the following 12 months.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
