Refi retention reached a 3.5-year high in the third quarter, with mortgage servicers retaining more than half of borrowers refinancing out of 2024 vintage loans, according to ICE Mortgage Technology’s Mortgage Monitor report.
Rate-and-term retention rose to 37%, one of the highest points in the past decade, while cash-out refinance retention rose to a more modest 23%, reflecting the challenge of identifying and retaining equity-seeking borrowers.
Non-banks retained refinancing borrowers at roughly three times the rate of banks (35% versus 13%). Retention was highest among FHA and VA mortgages (36%), trailed by GSE (25%) and portfolio-held loans (23%) and privately securitized loans (6%).
Rate-and-term refis accounted for 62% of all refi activity in October – and roughly 95% of rate-and-term refinances in September and October involved 2023–2025-era loans, the mortgage software firm reports.
Homeowners who recently refinanced using rate-and-term lowered their rate by an average of 0.92 percentage points, saving about $200 per month.
“Modest rate relief this fall has driven mortgage application volumes to multi-year highs, showing the outsized impact that incremental affordability improvements have on borrower behavior and servicer retention opportunities,” says Andy Walden, head of mortgage and housing market research at ICE, in the report. “We’re now seeing the highest concentration of rate-and-term refinances in nearly five years, almost entirely driven by borrowers holding 2023-2025 vintage loans.”
“Notably, the market has become more rate sensitive as hundreds of thousands of borrowers move in and out of refinance incentive with small daily rate shifts,” he adds. “This behavior shows how quickly demand can return when affordability improves, and it highlights just how closely households are watching rates as they try to manage monthly costs and access equity.”
The report shows that second lien equity withdrawals in the third quarter jumped to their highest level since 2007, signaling that homeowners are looking for ways to access cash while protecting ultra-low first-lien rates.
In addition, prepayment activity hit the highest level in 3.5 years, mirroring recent refi activity.
Photo: Charanjeet Dhiman