Mortgage rates continue to rise, leading to historically sluggish home sales. Factors like inflation concerns, global economic instability, and elevated 10-year Treasury bond yields are driving up already high rates, per CBS News. That’s pricing many aspiring homebuyers out of the market. Current homeowners with low existing mortgage rates are also hesitant to sell, limiting inventory and keeping home prices elevated.

That pressure on aspiring homebuyers circles back to lenders. Muted mortgage sales mean heightened competition for loans and pressure to reduce interest rates to attract borrowers. In a high-rate environment, borrowers are more likely to seek quotes from more lenders, and even a tiny difference in rates could be the deciding factor, per Business Insider.

Nonbank competitors’ dominance is further challenging traditional lenders. Players like United Wholesale Mortgage, Rocket Mortgage, Fairway Independent Mortgage Corporation, and CrossCountry Mortgage comprised 15 of the top 25 US mortgage lenders by originations in 2024, per The Motley Fool. They gained prominence after post-crisis regulations restricted banks' direct mortgage lending, and banks indirectly supported their growth by providing essential funding through warehouse lines of credit, per the ABA Banking Journal. This has allowed nonbanks to originate more loans without needing substantial capital.

In this environment, traditional lenders need strategies to appeal to customers still looking for mortgages. Here are three trends currently changing or poised to change the competitive dynamics in the mortgage market—and what traditional lenders should do in response.

Read the full report, US Home Lending Trends for 2025.