ICE: 24 Percent of Homeowners with a Mortgage Now Have a Rate Above 5 Percent 

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While a majority of U.S. homeowners with mortgages continue to be locked into rates below 5%, the share with rates above 5% is growing steadily.

As of May, 24% of homeowners with mortgages had a current interest rate of 5% or higher, according to ICE Mortgage Technology’s July 2024 Mortgage Monitor Report.

“As recently as two years ago, an astonishing nine of every 10 mortgage holders were below that threshold,” says Andy Walden, vice president of research and analysis for ICE, in the report. “All in, there are 5.8 million fewer sub-5 percent mortgages in the market today than there were at this time in 2022.”

As Walden notes, the overall market remains heavily skewed toward lower-rate mortgages, but that is changing.

“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,” Walden says. “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, 4 million first lien mortgages originated since 2022 have 30-year rates above 6.5%, with 1.9 million having rates of 7% or higher.

On average, there are 240,000 active mortgages in each 1/8th of a percentage point bracket in the 7-7.625% range; however, there’s a noticeable spike of 690,000 loans with rates just below 7%.

“The concentration of active loans just below 7 percent has more to do with borrower psychology than concrete savings,” Walden says. “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.”

Photo: Karsten Winegeart

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