Optimal Blue July 2025 data shows record-high non-QM share

The report found that mortgage rates rose in July across all loan types, with the Optimal Blue Mortgage Market Indices (OBMMI) 30-year conforming fixed rate up 5 bps to 6.72%.

FHA, VA and jumbo rates increased to 6.50%, 6.33%, and 6.89%, respectively. Purchase volume was flat YoY, while cash-out and rate-and-term refinance locks climbed 5% and 7%, helping offset weakness in purchases.

Although only 20% of the market, refinances are gaining traction as borrowers with post-2022 loans find opportunities to lower their monthly payments. Cash-out and rate-and-term refis rose 5% and 7%, respectively.

Non-QM lending accounted for 8% of July’s total rate lock volume, the highest since Optimal Blue began tracking the data in 2019. GSE-eligible originations fell to 52.2% and non-conforming rose to 16.8%.

The shift toward nontraditional financing reflects high rates, rising debt, expanded income verification options and loan limits pushing borrowers toward more flexible qualification paths.

Planned unit development (PUD) activity grew 0.85% to 28.5% of all production, while single-family homes declined by 0.87% to 63.5%. Despite the monthly increase, new construction market share is down 4% annually.

“As we near the end of peak buying season, 2025 purchase activity has largely tracked with 2024,” said Mike Vough, head of corporate strategy at Optimal Blue. “With affordability still a major constraint, purchase volume in line with 2024 is generally a disappointment to the industry based on 2025 projections We’re seeing more cash-out (+27% annually) and rate-and-term (+13% annually) opportunities as borrowers with post-2022 loans respond to even modest rate improvements, and borrowers may be undergoing some financial stress based on cash-out increases.”

Continued Vough, “There’s growing separation in the ways larger and smaller lenders are managing profitability. We saw an uptick in agency MBS executions, insinuating more market share is going to depositories and large IMBs, alongside stronger bid-to-cover ratios, indicating lenders are chasing the highest price over other execution considerations. Combined with deeper engagement in OBMMI-tied CME futures and many conversations about capital markets strategies for non-agency loans, it’s clear lenders are being proactive in their pricing, margin and pipeline risk strategies.”

Mortgage servicing rights (MSRs) for conforming 30-year loans fell 3 bps to 1.19, moving against the trend of the OBMMI benchmark rate. The decline was partly driven by greater intramonth volatility.

Sales to the agency cash window dropped 200 bps to 26%. Meanwhile, sales into agency mortgage-backed securities (MBS) climbed to 37%, signaling stronger securitization activity among large lenders and potential market share gains for that group.

Loan pricing trends also shifted. The share of loans sold at the highest available price rose to 70% (+100 bps), while those sold in the lowest pricing tier or worse fell to 11% (-100 bps). This suggests that special eligibility exceptions and representative delivery profiles were less influential in pricing than in prior months.

Adjustable-rate mortgages (ARMs) accounted for 9.52% of total volume in July, up from 8.81% in June, even as the Secured Overnight Financing Rate (SOFR) curve flattened — the 2-year/10-year spread narrowed by roughly 7 bps but remained positively sloped.

Credit quality dipped slightly. Average FICO scores for conforming loans fell 1 point to 756, FHA loans dropped to 675, and VA loans held steady at 713.

The average loan amount was $382,476, down from $386,084 in June. Of the top 30 MSAs, average loan amounts ranged from a high of $609,008 in the New York region to a low of $476,637 in Sacramento, Calif.