- As of the end of Q3 2024, U.S. mortgage holders held $17.2T in
equity, of which $11.2T is ‘tappable,’ meaning it can be borrowed
against with the homeowner maintaining a 20% equity stake in their
home
- The average homeowner with a mortgage now has $319K of equity
in their home, of which $207K is tappable
- Though Q3 withdrawals hit a two-year high – both collectively
and individually among second lien products ($27B) and cash-out
refinances ($21B) – the total represented just 0.42% of available
tappable equity
- Borrowers have been withdrawing equity at less than half the
10-year average 0.92% extraction rate, with second lien products
26% below typical levels and cash-outs 69% below the norm
- The past 10 quarters have seen half the equity extraction to
be expected in a ‘normal’ market, meaning $476B has gone untapped
and not flowed back through the broader economy
- In recent quarters, introductory rates on HELOCs have topped
9.5%, more than doubling the $167 March 2022 monthly interest-only
payment needed for a $50K withdrawal to a high of $413 in January
2024
- Recent Federal Reserve cuts to short-term interest rates –
more directly tied to HELOC than 30-year mortgage offerings – have
already made equity withdrawals modestly more affordable and
attractive
- If both market expectations for an additional ~1.5 pp in
additional Fed cuts and current spreads hold true, we could see
HELOC rate offerings in the low 7% range by the end of 2025
- That would drop the monthly payment needed to withdraw $50K in
equity back down below $300; still notably higher than the
historical average, but more than 25% below recent highs
Intercontinental Exchange, Inc. (NYSE:ICE), a leading global
provider of technology and data, today released its November 2024
ICE Mortgage Monitor Report, based on the company’s robust
mortgage, real estate and public records data sets.
This month’s Mortgage Monitor dives deep into ICE’s latest Q3
2024 homeowner equity data, reporting on both quarterly and annual
growth in mortgage holders’ housing wealth. Though 30-year interest
rates remain volatile, recent and anticipated short-term rate cuts
by the Federal Reserve have the potential to positively impact
equity-based lending. As Andy Walden, ICE Vice President of
Research and Analysis explains, though the cost to borrow against a
homeowner’s equity is notably higher than prior to the Fed’s most
recent tightening cycle, this dynamic is poised to change in the
year ahead.
“While growth in total mortgage holder equity is slowing along
with home prices, Q3’s $17.2T, up 5% from last year, represents
another seasonally adjusted record high,” said Walden. “Of that
total, $11.2T is available to homeowners with mortgages to borrow
against while maintaining a 20% equity stake in their homes. On
average, that works out to roughly $207K in tappable equity per
homeowner. And we did see a bump in equity withdrawals in Q3, with
cash-out refi extractions rising on what had been downwardly
trending 30-year rates and second-lien home equity products getting
a boost from rate cuts late in the quarter.”
In total, U.S. mortgage holders withdrew $48B of home equity in
the third quarter. This was the largest such equity withdrawal
volume in the two years since the Federal reserve first initiated
their latest tightening cycle. Both the $27B equity withdrawn via
second lien products and the $21B withdrawn via cash-out refinances
also marked their own individual two-year highs in Q3. Still,
homeowners remain historically reluctant to borrow against their
home equity. Just 0.42% of available tappable equity was withdrawn
in Q3 2024, well below the 0.92% average extraction rate in the
decade preceding the latest round of Fed increases.
“Despite a two-year high for equity withdrawals in the third
quarter, homeowners are still tapping their housing wealth at less
than half the rate they have historically,” Walden added. “Second
lien withdrawal rates are currently running more than a quarter
below ‘normal’ and cash-out refi withdrawals are still down almost
70%. Over the past 10 quarters homeowners have extracted $476B in
equity, exactly half the extraction we’d expect to see under more
normal circumstances. That equates to nearly a half a trillion
untapped dollars that hasn’t flowed back through the broader
economy.”
Elevated interest rates have been a deterrent to homeowner
equity utilization in recent quarters, as 30-year mortgage rates
climbed at times into the high 7% range, curtailing cash-out
refinance activity, and the average introductory rate on second
lien home equity lines of credit (HELOCs) rose above 9.5%. However,
the Federal Reserve recently began to cut short term interest
rates, to which HELOC rates are closely pegged, with additional
cuts expected on the horizon. As Walden points out, this could make
equity withdrawals both more affordable and more attractive.
“Since the Fed began its latest cycle of rate hikes, the monthly
payment needed to withdraw $50K via a HELOC more than doubled, from
as low as $167 per month back in March 2022 to $413 in January of
this year,” Walden said. “The market’s currently pricing in another
1.5 percentage points of cuts through the end of next year. If that
comes to fruition, and current spreads hold, it’ll have positive
implications for both new equity lending as well as for consumers
with existing HELOCs, with the payment on a $50K withdrawal falling
back down below $300 per month. While still notably above the
20-year average of $210, that represents a more than 25% reduction
from recent highs. Given borrowers’ recent sensitivity to even
slight rate drops, this could serve to entice additional HELOC
utilization, especially with mortgage holders sitting on record
stockpiles of equity and locked into their current homes via low
first lien rates.”
Based on the latest ICE Mortgage Futures as well as industry
consensus forecasts, mortgage rates are not expected to see the
full 1.5pp projected Fed rate decline flow through to 30-year
offerings, which could tighten the spread between 30-year mortgage
and HELOC rates and tip the needle toward equity utilization via
HELOCs for a subset of mortgage holders.
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 ICE Valuation 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://www.icemortgagetechnology.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/20241104210130/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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