Intercontinental Exchange, Inc. reports that a drop to 6.04% mortgage rates pushed 4.8 million borrowers into refinance territory and lifted affordability to a four-year high, with payments down $164 year over year.
Housing Affordability
● Housing affordability reached its best level since March 2022.
● The monthly principal and interest payment on the average-priced home fell to $2,091.
● Payments declined by $164 year over year, a -7% reduction.
● Households now need 27.8% of median income to afford the average-priced home.
● Fifteen major markets have returned to long-run affordability norms, including Cleveland, Memphis, Detroit, and Chicago.
● Nearly one in 10 large markets still require at least 10 percentage points more income than normal.
● Los Angeles requires 23 percentage points more income than its long-run norm.
● San Diego (+15 pp), New York (+13 pp), Providence (+13 pp), San Jose (+12 pp), Miami (+11 pp), and Seattle (+11 pp) remain highly stretched.
Home Prices and Inventory
● U.S. home prices rose 0.6% in 2025, the weakest annual growth since 2011.
● Annual price growth slowed further to +0.5% in January 2026.
● Seasonally adjusted prices increased just +0.04% from December.
● More than one-third of major markets saw seasonally adjusted price declines in January. ● Single-family prices rose 0.8% year over year, while condo prices fell 2.0%.
● 97 of the 100 largest markets saw stronger single-family price performance than condos.
● Roughly 40% of markets have prices below year-ago levels.
● The strongest annual price gains are concentrated in the Northeast and Midwest.
● New Haven, CT led with +6.8% annual growth, while Cape Coral, FL posted a -6.4% annual decline.
● Austin home prices are down 22.3% from peak levels.
Mortgage Lock-In and Listings
● At the start of 2025, 39.4 million homeowners had mortgage rates below 5%.
● By year-end, that figure declined only to 37.2 million, a 6% drop.
● About 12.1 million homeowners still have rates below 3%.
● Roughly two-thirds of all mortgages remain below 5%.
● More than 20% of borrowers now hold rates at or above current market levels, most originating within the past four years.
● National housing inventory remains meaningfully below 2017–2019 norms despite modest improvement.
● Inventory pullbacks in Austin, Denver, and San Jose helped stabilize pricing in those markets.
Home Equity and Negative Equity
● Total mortgage debt rose 4% in 2025 to a record $14.8 trillion.
● Mortgage balances equal 46.6% of leveraged home values, nearly 11 percentage points below the 25-year average.
● Homeowners held $16.9 trillion in equity entering 2026.
● Just under $11 trillion of that equity is considered tappable while maintaining 20% equity.
● Negative equity rose to 1.1 million borrowers, representing 2.1% of mortgages.
● This is up from 696,000 borrowers (1.3%) at the start of 2025.
● Another 3.2 million borrowers (7.9%) have less than 10% equity.
● In eight major markets, more than 5% of mortgaged homes are underwater.
● Lakeland, FL has the highest negative equity rate at 10.8%.
● 9.6% of VA loans and 5.7% of FHA loans are underwater.
● Among 2024 originations, more than 25% of VA loans and nearly 17% of FHA loans are underwater.
● GSE and portfolio loans show much lower negative equity rates at 0.5% and 1.3%, respectively.
Mortgage Performance and Delinquencies
● The national delinquency rate for first-lien mortgages fell 16 basis points in December to 3.68%.
● The December delinquency rate is 26 basis points below December 2019 pre-pandemic levels and 3 basis points lower than hurricane-affected levels from one year earlier.
● Early-stage delinquencies improved month over month, with 116,000 fewer borrowers one payment past due.
● Loans 90+ days past due but not yet in foreclosure increased by 30,000 and are at their highest level in nearly three years, 19,000 higher than one year ago.
● Including active foreclosures, 4.12% of mortgages were non-current in December, up 5 basis points year over year.
● VA loans posted the largest monthly improvement, with non-current rates declining by 28 basis points.
● FHA non-current rates remain elevated above 13%, more than triple the market average.
● More than 1 million FHA loans were past due, up 11% year over year.
Foreclosure Activity
● Approximately 401,000 loans were referred to foreclosure in 2025, up 25% year over year and the highest annual total since 2019.
● December recorded 40,000 foreclosure starts, the third-highest monthly total of 2025.
● Foreclosure inventory increased by 47,000 loans (+25%) in 2025, reaching its highest level since 2023.
● FHA loans entering foreclosure rose 59% year over year.
● Foreclosure sales totaled 80,000 in 2025, up 17% year over year and the largest volume since 2019.
● December foreclosure sales totaled 2,100, up 41% from December 2024.
● Loans in active foreclosure remain 17% below 2019 levels despite recent increases.
FHA-Specific Stress Indicators
● FHA loans 90+ days past due but not yet in foreclosure rose by 65,000 (+26%) in Q4, ending 2025 at just over 311,000.
● Active FHA foreclosures exceeded 100,000 for the first time since 2017, up nearly 60% (+38,000) year over year.
● 56% of 90+ day delinquent FHA loans are now in forbearance, the highest share in more than four years.
● The number of FHA loans in forbearance rose by more than 80,000 over the past three months.
● Underwater FHA loans that are also delinquent climbed above 200,000 in December, up 75% from 114,000 one year earlier.
Interest Rates and Refinance Incentives
● Mortgage rates declined to 6.04% on January 9, the lowest level since early 2023.
● The 30-year mortgage to 10-year Treasury spread narrowed to 185 basis points, the tightest since January 2022.
● Spreads have remained near 190 basis points, offsetting rising Treasury yields.
● Even with 10-year Treasury yields near 4.25%, 30-year mortgage rates held in a 6.11%–6.18% range through late January.
● ICE futures implied the 30-year mortgage rate for June 2026 fell about 20 basis points following the MBS purchase announcement.
● As of January 22, ICE futures suggest mortgage rates trending toward roughly 6.0% by July 2026.
Refinance Volume and Borrower Savings
● Roughly 4.8 million borrowers were “in the money” to refinance when rates hit 6.04%, a 20% increase (+845,000) almost overnight.
● The average refinance-eligible borrower could save approximately $370 per month.
● Aggregate potential monthly savings totaled roughly $1.7 billion.
● Nearly 1.3 million active mortgages carry rates between 6.875% and 6.99%.
● More than 500,000 of those loans were originated in 2025.
● Refinances accounted for 62% of mortgage applications in the week ending January 16, 2026.
● ICE estimates about two-thirds of refinance activity was rate-and-term rather than cash-out.
● Refinance activity reached a 17-week high but remained below mid-September levels when rates first dipped under 6.25%.
Andy Walden, Head of Mortgage and Housing Market Research at ICE:
“Even small reductions toward 6% rates can significantly boost affordability, particularly for homeowners who could refinance into a lower rate and monthly payments. When rates hit 6.04% on January 9, the number of homeowners in the money to refinance jumped by 20% and affordability hit its best level in four years. That said, affordability remains structurally challenged, with home prices still elevated relative to incomes and meaningful differences emerging across regions and borrower segments.”
Bob Hart, President of ICE Mortgage Technology:
“Today’s market is full of cross currents — borrowers responding quickly to rate shifts, affordability improving for some but not others, and pockets of rising credit stress. Our end-to-end mortgage platform helps servicers and lenders make sense of those moving parts and act on opportunity. It gives them a clearer view of who might benefit from refinancing, where portfolio risks are building, and how to engage customers with the right options at the right time — all while supporting timely follow-through.” |
