- According to ICE Mortgage Technology data and analytics, as of
May, 24% of mortgage holders had current interest rates of 5% or
higher, up from 10% two years ago
- Four million loans originated since 2022 have rates of 6.5% or
higher – 1.9M at 7%+ – providing modest opportunity for growth in
the number of mortgage holders with incentive to refinance as rates
ease
- An average of ~240K mortgages sit in each 1/8th of a percent
rate band from 7-7.625% providing only modest increases to the
number of in-the-money mortgages as those loans gain refinance
incentive
- There’s a spike of 690K loans with rates just below 7%, driven
in part by borrowers buying down their rates for the comfort of an
interest rate that starts with a 6, which could be a tipping point
to more meaningful, albeit still modest, refi activity as those
borrowers gain incentive to refinance
- The VA share of rate/term refi activity experienced a
noticeable upswing in recent weeks, accounting for more than 30% of
recent rate locks, according to ICE originations data, up from less
than 10% last year
- The average VA refinance borrower is early into their 30-year
term (average prior loan age of ~1 year) and benefitting from a 1pp
cut in their first lien mortgage rate, for an average savings of
$230 per month
- Refinance retention hit its highest level in 18 months in Q1,
driven in part by a tripling of rate/term retention – from 15% in
Q4 to 46% in Q1 – among borrowers refinancing their VA and FHA
loans
Intercontinental Exchange, Inc. (NYSE:ICE), a leading global
provider of technology and data, today released its July 2024 ICE
Mortgage Monitor Report, based on the company’s industry-leading
mortgage, real estate and public records data sets.
This month’s Mortgage Monitor looks into the dynamics behind the
changing makeup of the active mortgage market, which is gradually
shifting toward higher average rates. As Andy Walden, ICE’s Vice
President of Research and Analysis notes, the overall market
remains heavily skewed toward lower-rate mortgages, but that is
changing.
“As of May, 24% of homeowners with mortgages now have a current
interest rate of 5% or higher,” said Walden. “As recently as two
years ago an astonishing nine of every 10 mortgage holders were
below that threshold.
“All in, there are 5.8M fewer sub-5% mortgages in the market
today than there were at this time in 2022. This has been a
slow-moving change, as borrowers with lower rates have sold their
homes or, to a smaller degree, refinanced to withdraw equity. The
entire market is acutely aware of how elevated rates have been
constraining origination volumes. But seen from another angle, the
same dynamic is also serving to gradually enlarge the population of
folks with high-rate mortgages, who are actively waiting for the
moment a refinance makes sense. This would benefit both a growing
number of homeowners and lenders.”
As noted in the report, 4M first lien mortgages originated since
2022 have 30-year rates above 6.5%, with 1.9M having rates of 7% or
higher. On average, there are ~240K active mortgages in each 1/8th
of a percentage point bracket in the 7-7.625% range; however,
there’s a noticeable spike of 690K loans with rates just below 7%.
Walden explains:
“The concentration of active loans just below 7% has more to do
with borrower psychology than concrete savings. There’s clearly
something appealing in today’s market for a homeowner to see a
6-handle in front of their mortgage rate. From a rate/term
refinance lending perspective, this group is worth watching as they
represent a potential tipping point for a return to more
meaningful, albeit historically modest, refi volumes.”
For now, refi volumes remain at a fraction of historical levels.
That said, we have seen some notable shifts in who is taking out
refis in today’s market. Consider, for example, the recent rise in
VA market share, from less than 10% of rate/term refis a year ago
to more than 30% in recent weeks, according to ICE origination
data.
The rise in VA refinance share seems to be due, in large part,
to streamline refinances. Some veterans, especially those who had
taken out mortgages within the past year, availed themselves of the
streamlined refinancing program to lower their interest rate by
more than a full percentage point, for an average savings of $230
per month among April originations, according to a before-and-after
analysis of ICE McDash +Property data.
That makes sense, considering the ICE U.S. VA 30-Year fixed rate
mortgage index is down nearly a full percentage point from its peak
in late October, with the average rate offering among such loans
notably below that of FHA and conforming mortgage counterparts. VA
refinances also helped improve the servicing retention rate in Q1
to its highest level in 18 months, with retention of FHA and VA
refinances tripling from 15% in Q4 to 46% in Q1.
Those lower payments come at a cost, however, as the average
borrower increased their loan balance to buy down their rate and/or
finance closing costs. The quick turn also resulted in unusually
high prepay speeds, which can negatively impact investors in VA
loan backed securities.
The recent activity among VA loans supports the findings of the
recently released 2024 ICE Borrower Insights Survey, which showed
that finding the lowest mortgage rate trumped all other concerns
when choosing a lender, with a 20-point delta between that and the
next most frequent choice. But, while borrowers want the lowest
rate, they typically don’t consider many options.
In fact, 84% of borrowers surveyed considered only one (36%) or
two (48%) options before selecting a lender. This, as well as the
successful proactive retention of FHA/VA borrowers in Q1, shows how
important it is for lenders to stay attuned to their borrowers’
needs and make first contact when a beneficial refi opportunity
arises.
Much more information on these and other topics can be found in
this month’s Mortgage Monitor.
About Mortgage Monitor
ICE manages the nation’s leading repository of loan-level
residential mortgage data and performance information covering the
majority of the overall market, including tens of millions of loans
across the spectrum of credit products and more than 160 million
historical records. The combined insight of the ICE Home Price
Index and Collateral Analytics’ home price and real estate data
provides one of the most complete, accurate and timely measures of
home prices available, covering 95% of U.S. residential properties
down to the ZIP-code level. In addition, the company maintains one
of the most robust public property records databases available,
covering 99.9% of the U.S. population and households from more than
3,100 counties.
ICE’s research experts carefully analyze this data to produce a
summary supplemented by dozens of charts and graphs that reflect
trend and point-in-time observations for the monthly Mortgage
Monitor Report. To review the full report, visit:
https://www.icemortgagetechnology.com/resources/data-reports
About Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE: ICE) is a Fortune 500
company that designs, builds, and operates digital networks that
connect people to opportunity. We provide financial technology and
data services across major asset classes helping our customers
access mission-critical workflow tools that increase transparency
and efficiency. ICE’s futures, equity, and options exchanges --
including the New York Stock Exchange -- and clearing houses help
people invest, raise capital and manage risk. We offer some of the
world’s largest markets to trade and clear energy and environmental
products. Our fixed income, data services and execution
capabilities provide information, analytics and platforms that help
our customers streamline processes and capitalize on opportunities.
At ICE Mortgage Technology, we are transforming U.S. housing
finance, from initial consumer engagement through loan production,
closing, registration and the long-term servicing relationship.
Together, ICE transforms, streamlines, and automates industries to
connect our customers to opportunity.
Trademarks of ICE and/or its affiliates include Intercontinental
Exchange, ICE, ICE block design, NYSE and New York Stock Exchange.
Information regarding additional trademarks and intellectual
property rights of Intercontinental Exchange, Inc. and/or its
affiliates is located here. Key Information Documents for certain
products covered by the EU Packaged Retail and Insurance-based
Investment Products Regulation can be accessed on the relevant
exchange website under the heading “Key Information Documents
(KIDS).”
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995 -- Statements in this press release regarding
ICE's business that are not historical facts are "forward-looking
statements" that involve risks and uncertainties. For a discussion
of additional risks and uncertainties, which could cause actual
results to differ from those contained in the forward-looking
statements, see ICE's Securities and Exchange Commission (SEC)
filings, including, but not limited to, the risk factors in ICE's
Annual Report on Form 10-K for the year ended December 31, 2023, as
filed with the SEC on February 8, 2024.
Source: Intercontinental Exchange
Category: Mortgage Technology
ICE-CORP
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version on businesswire.com: https://www.businesswire.com/news/home/20240702806531/en/
ICE Media Contact Mitch Cohen mitch.cohen@bkfs.com +1
(704) 890-8158
ICE Investor Contact: Katia Gonzalez
katia.gonzalez@ice.com +1 (678) 981-3882
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