ICE Mortgage Monitor: Refinance Activity Increased Especially for Rate/Term Refinances

Here is the ICE December Mortgage Monitor report (pdf).

Press Release: ICE Mortgage Monitor: Recent Vintage Borrowers Pounced on Early-Autumn Rate Drops as 300K+ Refinanced in September and October

• 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

  emphasis added

Mortgage Delinquencies Decreased in October

Here is a graph on delinquencies from ICE. Overall delinquencies decreased in October and are below the pre-pandemic levels. Source: ICE McDash

• The national delinquency rate fell 3 basis points to 3.45% in October, down -0.8% for the month, but up 6% year over year ‒ the fifth consecutive month of year-over-year increases

• Serious delinquencies (loans 90+ days past due but not in active foreclosure) rose 3.6K (+0.8%), continuing their slow rise, and were up 7.3% year over year

• The number of borrowers a single payment past due decreased -11K, and 60-day delinquencies were down -4K, but both remained elevated from the prior year

• Foreclosure activity remains muted due in part to ~70% of serious delinquencies still being protected from foreclosure by loss mitigation; only 145K loans are at near-term risk of foreclosure, on par with the four-year average

Refinance Activity Increased especially for rate/term Refinances

When mortgage rates declined in September and October, there was a surge in refinance activity, especially in rate/term refinances by homeowners with mortgage rates in the 7%+ range.

• Borrowers pounced on the opportunity to quickly ditch higher-rate mortgages as rates fell through August and September, with refinance volumes hitting their highest levels in more than 2.5 years and more than a quarter of October lending driven by refis

• More than 300K borrowers closed on refinances in September and October, including nearly 150K rate/term refinances

• Rate/term transactions in October exceeded cash-outs for the first time in more than three years

• Borrowers and lenders alike wasted little time in pulling those transactions through to close, with average closing times hitting their lowest October levels on record dating back to 2019 when ICE began tracking that particular metric

• Refinances out of 2023 and 2024 vintages drove 78% of rate/term lending, and nearly half of refinance activity overall

• The average rate/term refinancer had only held their previous mortgage for 15 months prior to refinancing, the shortest such tenure in the nearly 20 years ICE has been reporting that metric

“Annual home price growth edged slightly higher in October”

Here is the year-over-year in house prices according to the ICE Home Price Index (HPI). The ICE HPI is a repeat sales index. ICE reports the median price change of the repeat sales. The index was up 3.0% year-over-year in October, up from 2.9% YoY in September.

Source: ICE Home Price Index (HPI)

• As anticipated, annual home price growth edged slightly higher in October, to +3.0% from +2.9% in September, after easing in each of the previous seven months

• The uptick was due in part to a modest rise in seasonally adjusted monthly growth in October, as lower mortgage rates through August and September spurred an improvement in demand, but is mostly attributable to softer growth numbers from Q4 2023 beginning to cycle out of the calculation

• Despite seasonally adjusted 1-month price growth edging slightly higher in October (+0.20% versus +0.14% in September) that’s equivalent a seasonally adjusted annualized rate (SAAR) of just +2.4%, suggesting that the annual growth rate should begin to soften again as we move into early 2025

• It’s also worth noting that rising interest rates around the recent presidential election have led to a modest demand pullback, which could also soften monthly price gains in late 2024 and early 2025

Here is a graph on the one-month change in the ICE HPI not seasonally adjusted (NSA). Note the weakness in house prices in October, November and December 2023.

There is much more in the mortgage monitor.