According to HousingWire's reporting on Optimal Blue data, we're seeing some interesting shifts in how lenders are doing business as mortgage rates continue climbing. Non-QM lending, which serves borrowers who don't fit traditional qualification boxes, actually grew in September while the broader mortgage market cooled. Non-QM rate-lock volume jumped compared to the previous month, and these loans now represent a meaningful slice of overall production. Meanwhile, traditional conforming loans lost market share, which tells you that fewer borrowers can meet those stricter requirements at current rates.
The data also shows that adjustable-rate mortgages are making a comeback. ARM usage hit its highest level in Optimal Blue's tracking history, jumping significantly from August. Within the non-QM category, lenders are spreading their bets across different loan types, with investor loans and debt-service-coverage ratio products leading the way, followed closely by bank-statement loans. This diversification suggests lenders are finding different ways to serve purchase demand even when traditional paths are closing off.
On rates themselves, the conforming mortgage rate ended September at a notably elevated level, and Optimal Blue's economists are forecasting continued increases over the coming year. The data shows refinancing activity has largely dried up, which isn't surprising when rates keep moving higher. Purchase lending held up better than I might have expected, but the composition of those purchases is changing dramatically as borrowers and lenders adapt to the new rate environment.
What I am seeing locally here in the Bay Area and East Bay is that buyers are getting more creative about their financing options, and frankly, they have to be. As rates stay elevated and conforming products become tighter, non-QM and ARM products are filling a real gap for borrowers who might otherwise sit on the sidelines. For sellers, this means there's still purchase activity out there, but the buyer pool is shifting toward those with more flexible income documentation or those willing to take on rate risk with adjustable mortgages. It's a different market than we're used to, and adaptability is becoming the key differentiator.
