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

Rhea-AI Summary

ICE's December 2024 Mortgage Monitor Report reveals a significant surge in mortgage refinancing activity during September and October, with over 300,000 closings - the highest in 2.5 years. This surge occurred when 30-year conforming mortgage rates dropped to the low 6% range. Notable findings include:

- Nearly 150,000 were rate/term refinances, exceeding cash-out refis for the first time in 3 years
- Average borrowers reduced their first lien rate by over a point and monthly payments by $320
- VA loans represented 30% of rate/term activity
- Over 35% of VA and 10% of all rate/term refinances in 2024 had loan-to-value ratios exceeding 100%

Positive

• Record-breaking refinancing activity with 300,000+ closings in Sept-Oct 2024
• Average monthly payment savings of $320 per borrower, totaling $47M in aggregate savings
• Improved lender retention rates exceeding 33% for rate/term refinances
• Shortest average refinance timeline in 20 years at 15 months

Negative

• High loan-to-value ratios (>100%) in 35% of VA and 10% of all rate/term refinances indicate increased performance risk
• Elevated prepayment risk in VA mortgage segment

Insights

Financial Analyst

The surge in refinancing activity, with over 300K transactions in September-October, marks a significant shift in mortgage market dynamics. The $47M monthly payment savings achieved through rate/term refinances signals improved household financial health. The dominance of 2023-2024 vintage mortgages in refinancing (78% of rate/term lending) demonstrates borrowers' financial acumen in quickly capitalizing on lower rates. However, the high proportion of VA loans with >100% LTV ratios raises potential credit quality concerns. For ICE, this trend indicates strong revenue potential from their mortgage technology and data services, particularly given the improved closing times and higher retention rates (over 33%).

Market Research Analyst

This data reveals a significant behavioral shift in the mortgage market. The prevalence of rate/term refinances over cash-out refis for the first time in three years indicates consumers are prioritizing long-term savings over immediate cash access. The varying rate sensitivity based on loan size, with jumbo borrowers (>$750K) requiring less rate incentive to refinance, provides valuable market segmentation insights. The 30% share of VA refinances, at 4x their market representation, suggests a particularly active military borrower segment. For ICE, this demonstrates the value of their comprehensive data analytics capabilities to the mortgage industry.

- 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

ATLANTA & NEW YORK--(BUSINESS WIRE)-- 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

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Source: Intercontinental Exchange

FAQ

How many mortgage refinances closed during ICE's September-October 2024 report?

Over 300,000 mortgage refinances closed during September and October 2024, marking the highest volume in 2.5 years.

What was the average monthly payment reduction for refinancing borrowers according to ICE's report?

Refinancing borrowers saved an average of $320 per month on their mortgage payments, resulting in aggregate savings of $47M monthly.

What percentage of VA refinances in 2024 had loan-to-value ratios over 100% according to ICE?

More than 35% of VA rate/term refinances in 2024 had loan-to-value ratios exceeding 100%.

What was the average rate reduction for VA loan refinances in October 2024?

VA loan borrowers saw the largest rate improvements, with an average rate reduction of 1.28 percentage points in October 2024.