- More than 300K mortgage refinances closed in September and
October – the most in 2.5 years – as borrowers took advantage of
interest rates in the low 6% range
- Nearly 150K of those were rate/term refinances, with October
marking the first time in 3 years that rate/term volumes outpaced
those of cash-out refis
- The average rate/term borrower in September and October cut
their first lien rate by more than a point and their payment by
$320/month, for an aggregate $47M monthly savings in just those two
months alone
- Mortgage holders refinancing out of and back into Veterans
Administration (VA) loans accounted for more than 30% of rate/term
activity, more than 4x the VA market share among all active
mortgages
- More than 35% of VA and more than 10% of all rate/term
refinances this year have been originated with loan-to-value ratios
of over 100%, increasing potential performance risk down the
road
Intercontinental Exchange, Inc. (NYSE:ICE), a leading global
provider of technology and data, today released its December 2024
ICE Mortgage Monitor Report, based on the company’s robust
mortgage, real estate and public records data sets.
When 30-year conforming mortgage interest rates fell into the
low 6% range in August/September of this year, the mortgage
industry experienced a welcome burst of refinance activity. This
month’s Mortgage Monitor dives deep into ICE Mortgage Trends closed
loan data to learn what that brief “boomlet” in borrowing activity
reveals about U.S. mortgage holders and their motivations in
today’s market. As Andy Walden, ICE Vice President of Research and
Analysis explains, homeowners with loans originated in the last few
years were quick to act when the rate calculus turned in their
favor.
“Homeowners pounced on their incentive to refinance as rates
fell through August and September,” said Walden. “More than 300K
mortgage holders closed on refinance transactions in September and
October, the most we’ve seen in two-and-a-half years. What’s more,
almost half of that activity involved the homeowner refinancing
into a better rate, with October marking the first time in three
years that there were more rate/term than cash-out refinances in a
given month.”
ICE Market Trends data also showed that technologically-adept
lenders were ready to meet that demand, with average closing times
among all loan types – purchase as well as cash-out and rate/term
refinances – all hitting their lowest October levels in the five
years ICE has been tracking the metric. According to ICE McDash
+NextLoan data, which tracks loans before and after a refinance or
other prepayment, this is translating into higher retention rates
as well, with servicers retaining more than a third of customers
refinancing to improve their rate or term, the best in two and a
half years. As has been the case in recent years, retention was
strongest – nearing 40% – among those who’d recently taken out
their mortgages.
“This brief, but welcome, spike in refinancing was dominated by
homeowners quickly ditching their recently acquired mortgages,”
Walden continued. “Refinances out of 2023 and 2024 vintages drove
an impressive 78% of recent rate/term lending and nearly half of
refi activity overall. The average rate/term refinancer had been in
their prior mortgage for just 15 months, the shortest average
length of time in the nearly 20 years we’ve been tracking that
metric. For most, this was a no brainer; on average, these folks
cut their first lien rates by more than a point and their monthly
mortgage payment by $320 per month. That works out to roughly $47M
in monthly payment savings locked in by homeowners in just
September and October alone.”
More than two thirds of all rate/term refinances dropped their
rate by more than a full percentage point (pp), while nearly a
third were able to improve their rate by 1.5 pp or more. Borrowers
with mortgages backed by the VA saw the largest monthly
improvements, dropping their rates by 1.28 pp on average in
October, as compared to the 1.08 to 1.18 pp declines seen among
other loan products and investor classes
"As you'd expect," Walden continued, "the interest rate
threshold at which a given homeowner would be enticed to pull the
trigger on a refi varied by loan size. Nearly half of refinancing
borrowers with balances between $250K and $375K needed a 125 basis
point (bps) reduction before deciding to refi. The distribution of
rate savings for those with balances between $375K and $624K were
largely similar. Once a borrower's balance got above $750K,
however, it was clear that less rate incentive was required for a
refinance to be of value. Nearly 40% of those borrowers cut their
first lien 75 bps or less by refinancing, and about 12% saw benefit
in doing so even with less than a 50 bps reduction."
Refinances from and back into VA mortgages accounted for
approximately 30% of September and October rate/term lending, some
four times their representation among active mortgages. In addition
to the increased prepayment risk this represents, performance risk
must be taken into consideration as well. More than 35% of 2024 VA
rate/term refinances have had loan-to-value ratios over 100%. This
stems from a combination of the refinancing of more recent
vintages, which haven't had time to improve their equity positions,
and loan programs that allow borrowers to finance closing costs and
even interest rate buydowns up to certain thresholds.
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://mortgagetech.ice.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/20241209445113/en/
ICE Media Contact Mitch Cohen mitch.cohen@ice.com +1
(704) 890-8158
ICE Investor Contact: Katia Gonzalez
katia.gonzalez@ice.com +1 (678) 981-3882
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