ICE Mortgage Monitor: Average Payment Hits All-Time High; Spiking Insurance Costs Rising at 3X the Rate of Principal, Interest, and Taxes

Rhea-AI Summary

ICE's October 2024 Mortgage Monitor Report reveals record-high average monthly mortgage payments, reaching $2,070 in August. This represents a 7.2% increase from last year and a 19.3% rise since early 2020. The report highlights significant disparities between pre-2022 and post-2022 mortgages, with newer loans allocating a larger portion to interest payments.

Property insurance costs have surged dramatically, increasing by 52% since 2020, outpacing other payment components. In high-risk areas like New Orleans and Miami, insurance can account for up to 25% of monthly mortgage payments. The report also notes regional variations in insurance costs, with some areas paying over three times the national average per $1,000 of coverage.

Positive

• ICE's comprehensive data analysis provides valuable insights into mortgage market trends
• The report offers detailed breakdowns of mortgage payment components, aiding in market understanding

Negative

• Record-high average monthly mortgage payments of $2,070 in August, up 19.3% since 2020
• Property insurance costs have surged 52% since 2020, significantly outpacing other payment components
• Newer mortgages allocate a larger portion to interest payments, with less going towards principal reduction
• High-risk areas face insurance costs up to 25% of monthly mortgage payments, potentially affecting affordability

Insights

Financial Analyst

The ICE Mortgage Monitor report reveals significant trends in mortgage payments, highlighting record-high costs and shifting payment structures. The average monthly PITI payment hit $2,070 in August, a 19.3% increase since 2020. This surge is driven by increases across all payment components, with insurance costs rising at an alarming rate.

Key findings include:

• Recent mortgages (2023/24) allocate 66% to interest and only 12% to principal reduction
• Property insurance costs have surged 52% since 2020, now accounting for 9.4% of monthly payments
• High-risk areas see insurance costs up to 25% of total PITI

These trends suggest potential challenges for homeowners, particularly those with fixed incomes or high DTI ratios. The increasing share of variable costs in mortgage payments could lead to affordability issues and impact the housing market's stability. Investors should monitor these trends for potential ripple effects on mortgage-backed securities, insurance companies and regional housing markets.

Insurance Industry Expert

The sharp increase in property insurance costs highlighted in the ICE Mortgage Monitor report is a critical development for the insurance industry and homeowners alike. The average monthly insurance payment has increased by 52% since 2020, outpacing other mortgage components significantly.

Key insurance-related insights:

• Insurance premiums now average $5.38 per $1,000 of coverage, up from $4.65 in 2013-2022
• High-risk areas like New Orleans and Miami see premiums around $17 per $1,000 of coverage
• Insurance costs extend beyond hurricane zones into tornado and hail-risk areas

This trend reflects the industry's response to increasing climate-related risks and rising replacement costs. For investors, this signals potential growth in premium volumes for property insurers but also highlights the need for improved risk management and potential regulatory scrutiny. The trend may also drive demand for alternative risk transfer mechanisms and insurtech solutions aimed at more precise risk assessment and pricing.

Real Estate Market Analyst

The ICE Mortgage Monitor report underscores significant shifts in the real estate market dynamics. The record-high average monthly mortgage payment of $2,070 reflects broader market pressures and changing affordability landscapes.

Key real estate implications:

• Newer mortgages face $600 higher monthly payments compared to 2020/2021 vintages
• 35% of payments for older loans go toward variable costs, risking future increases
• Regional variations in insurance and tax burdens are reshaping market attractiveness

These trends suggest a potential slowdown in housing market activity, particularly in high-cost and high-risk areas. The increased burden of insurance and taxes may shift buyer preferences towards lower-risk regions or prompt reassessment of property values. For investors, this could signal opportunities in markets with more favorable cost structures and potential challenges in areas with escalating ownership costs. The situation may also drive innovation in real estate financial products and services aimed at mitigating these rising costs for homeowners.

- The average monthly payment (principal, interest, taxes and insurance, or PITI) among active mortgages hit a record $2,070 in August; up $140 (+7.2%) from last year and $399 (+19.3%) since the start of 2020

- Average PITI on loans originated in the last two years is $600 per month higher than that of 2020/2021 vintage mortgages, with two-thirds of each payment devoted to paying down interest

- In contrast, just 12% of the monthly payment among 2023/24 mortgages goes directly toward principal reduction – less than half the comparative average for other recent vintages

- Though older loans have lower PITI, 35% of those payments go toward variable costs, such as taxes and insurance, that are at risk of increase even as principal and interest components remain fixed

- All aspects of mortgage payments are rising as home prices, loan balances, interest rates and taxes have trended higher, with average principal, interest and tax payments up 15-17% since the start of 2020

- Increased property insurance costs stand out; the average monthly insurance payment is up 52% since the start of 2020, with increases in some higher-risk areas as high as 90% over that same period

- Rising premiums are due, in part, to higher home prices, but a direct comparison of mortgages analyzed shows a sharp jump from an average $4.65 per $1K covered from 2013-2022 to $5.38/$1K in July 2024

- In New Orleans and Miami, property insurance is ~$17/$1K in coverage, more than 3X the U.S. average; higher costs also extend beyond hurricane zones and into the tornado and hail risk of the central states

- On average, insurance premiums account for 9.4% of monthly mortgage payments, up from less than 7.7% from 2013-2020, hitting their highest share on record

- In high-risk areas, property insurance can make up as much as 25% of the average mortgage holder’s overall monthly PITI payment

ATLANTA & NEW YORK--(BUSINESS WIRE)-- Intercontinental Exchange, Inc. (NYSE:ICE), a leading global provider of technology and data, today released its October 2024 ICE Mortgage Monitor Report, based on the company’s robust mortgage, real estate and public records data sets.

This month’s Mortgage Monitor examines the components that make up what has become, as of August, the largest average monthly payment in history among active mortgages by dollar amount. According to ICE Vice President of Research and Analysis Andy Walden, every element of a mortgage payment – principal, interest, taxes and insurance (PITI) – has been rising in recent years, but spikes in property insurance costs have been particularly sharp.

“All in, accounting for both fixed and variable inclusions, the average payment among U.S. mortgage holders hit a record high of $2,070 in August,” said Walden. “That’s about $140 more than at the same time last year, and up nearly $400 since the beginning of 2020 – a more than 19% increase from pre-pandemic times. When you peel back the layers on the data, a clear delineation appears between those fortunate enough to have taken out their mortgages before the Fed began to raise interest rates in 2022 and everyone who’s taken one out since. For this second group, a historically outsized share of their total mortgage payment is covering interest, with very little – even considering the young age of the loans – going towards principal.”

More seasoned mortgages, though they tend to have lower overall mortgage payments, are seeing a growing share of total PITI going to variable costs that exist outside of fixed rate terms and set principal and interest installments. Indeed, more than a third of their perceived ‘fixed’ housing payment consists of variable costs.

“While principal, interest, and taxes have all increased in the 15-17% range since the beginning of 2020, property insurance is up 52% over the same time span,” Walden said. “And, yes, higher home prices logically lead to higher-dollar policies; that’s why looking at the cost for every $1,000 of coverage gives us such critical, apples to apples, context. Not only are homeowners paying 12% more today for the same dollar amount of coverage than they were, on average, from 2013-2022, but they’re also insuring a smaller share of the property’s underlying value. Given that coverage amounts are based not on a property’s market value, but its replacement cost, the average policy has also gone from covering over 100% of the average home’s value back in 2013-2015 to just 88% today.”

In two particularly hurricane-prone metros, New Orleans and Miami, annual insurance premiums on mortgaged single-family residences average ~$17 per $1K of policy coverage, more than three times the national average of $5.38. Higher relative premiums are also seen throughout the central U.S. corridor where tornados and hail are the more prevalent risk elements. In Oklahoma City, for example, annual premiums average more than $10 per $1K of coverage, nearly twice the national average. Insurance costs are much lower on a relative basis across the northeastern and western portions of the country, falling below $3 per $1K of coverage in metros such as San Jose, Calif., San Francisco, Las Vegas and Rochester, N.Y.

“Given the rising costs of homeowner’s insurance in many areas of the country, it’s hardly surprising that premiums now make up more than 9.4% of monthly obligations on mortgaged single-family homes across the U.S.,” Walden added. “That’s up from an average of less than 7.7% from 2013-2020 and the highest share on record. Of course, in higher-risk areas such as New Orleans, the share of the mortgage payment earmarked for insurance can be as high as 25%. That’s something we also see beyond traditional hurricane zones. For example, insurance already accounts for more than 15% of monthly mortgage payments in areas like Oklahoma City, Wichita and Tulsa and, every day, a growing number of potential trouble spots emerge.”

In other areas of the country, it is not insurance, but rather high property taxes that are the main driver of mortgage payment variability. In the Northeast, as well as parts of the Midwest and Texas, for example, more than 40% of the average mortgage payment is made up of variable costs. Perhaps the most notable examples are Rochester and Syracuse, in New York, where property taxes alone account for more than 35% of the average monthly mortgage payment. Despite 95% of such loans having set principal and interest payments, this presents a particular concern for mortgage holders with fixed incomes, and those with loans originated at the high end of debt-to-income (DTI) 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://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

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View source version on businesswire.com: https://www.businesswire.com/news/home/20241007478334/en/

ICE Media Contact

Mitch Cohen

mitch.cohen@ice.com

+1 (704) 890-8158

ICE Investor Contact:

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Source: Intercontinental Exchange

FAQ

What is the average monthly mortgage payment according to ICE's October 2024 report?

According to ICE's October 2024 Mortgage Monitor Report, the average monthly mortgage payment (PITI) reached a record high of $2,070 in August.

How much have property insurance costs increased since 2020 for ICE-analyzed mortgages?

The report indicates that property insurance costs have increased by 52% since the start of 2020 for the mortgages analyzed by ICE.

What percentage of monthly mortgage payments does insurance account for in high-risk areas, according to ICE?

In high-risk areas such as New Orleans, insurance can account for up to 25% of the average mortgage holder's monthly PITI payment, as reported by ICE.

How do insurance costs in New Orleans and Miami compare to the national average, based on ICE's data?

According to ICE's report, insurance costs in New Orleans and Miami are approximately $17 per $1,000 of coverage, which is more than three times the national average of $5.38.