Two years ago, nine out of 10 mortgage rates were below 5%. Today, there are 5.8 million fewer mortgages on the market with rates below 5 per cent, while a quarter of borrowers are on a higher rate.
Held July 30-August at Inman Connect Las Vegas. On January 1, 2024, the noise and misinformation will be cut away, all your big questions will be answered, and new business opportunities will be revealed. join us.
The number of homeowners feeling constrained by the effects of mortgage lock-in is gradually shrinking, with a quarter of homeowners who don’t own their home outright now paying mortgage rates of 5% or more.
The trends that have emerged over the past two years have been slow-moving, according to data released by Intercontinental Exchange (ICE) on Monday. However, the data was positive for both real estate agents and lenders, who are seeing a sharp contraction in home sales and refinances after the Federal Reserve begins raising interest rates in 2022 to combat inflation.
“All in all, there are 5.8 million fewer mortgages with sub-5% mortgages on the market today than there were at this time in 2022,” ICE’s Andy Walden said in a statement. “This is a slow change as borrowing at lower interest rates People have sold their homes or, to a lesser extent, refinanced to extract equity.”
Two years ago, nine out of 10 mortgage rates were below 5% after homeowners rushed to refinance their loans at rock-bottom rates during the pandemic. Many homeowners may be leaning toward selling but feel like they’re locked into their existing home because they don’t want to take out a new mortgage at a higher interest rate.
Andy Walden
“The market as a whole is acutely aware of how rising interest rates are limiting raw volume,” Walden said. “But looking at it from another perspective, the same dynamics are also gradually expanding the number of people holding high-rate mortgages who are Actively waiting for the opportunity to refinance will benefit more and more homeowners and lenders.
A quarter of mortgages have interest rates above 5%
Source: ICE Mortgage Monitor, July 2024.
According to the July 2024 ICE Mortgage Monitor Report, approximately 4 million mortgages originated since 2022 had interest rates above 6.5%, including 1.9 million with interest rates of 7% or higher. As of May, 24% of mortgages had interest rates above 5%, ICE data shows.
Homeowners cashing out equity by refinancing at higher rates could be a good prospect for real estate agents looking to snap up homes. About two-thirds of mortgage refinances are still cash-out requests, ICE noted.
For mortgage lenders, recent homebuyers may be eager to refinance if rates continue to fall from their peak in October 2023. , now accounts for the third place in refinancing applications.
Loan servicers that collect homeowners’ monthly mortgage payments are well-positioned to capture this refinance business, retaining nearly half of recently originated mortgages when borrowers refinance.
Lenders keep recently issued mortgages
Source: ICE Mortgage Monitor, July 2024.
While some lenders sell mortgage servicing rights to companies that specialize in collecting payments, larger lenders like Rocket Mortgage and UWM typically like to service their own loans so they can increase the cost of servicing borrowers on their next mortgage. Chance.
In the first quarter of 2024, lenders were able to retain 29% of borrowers who refinanced at a lower rate and 22% of borrowers who sought cash-out refinancing. But retention rates are much higher for newer mortgages – 47% for loans originated in 2023 and 41% for older loans in 2022.
ICE estimates that from 2022 to now, there will be approximately 4 million mortgages with interest rates at or above 6.5%, and “it is important for lenders and servicers to stay engaged with these borrowers so they can be there when opportunities arise.”
Get Inman’s mortgage newsletter delivered straight to your inbox. A weekly digest of all the biggest news in mortgages and settlements around the world is published every Wednesday. Click here to subscribe.
Email Matt Carter
