has released its February 2024 Mortgage Monitor Report based off the company’s internal data, real estate data, and public record data sets found that mortgage rates overall stood at around 6.71% as of Jan. 24, more than a full precent below the home interest rate high in October 2023.
As ICE VP of Enterprise Research Strategy Andy Walden explains, this and other recent market trends have produced positive, yet measured, signs for the 2024 housing market.
“Prospective homebuyers may feel an all-too-familiar sense of dread upon hearing that prices—already at record highs—rose another 5.6% in 2023 according to our ICE Home Price Index,” Walden said. “As always, the truth of the situation is more nuanced than one simple, backward-looking metric might suggest, and the data holds some encouraging signals for these folks”
“In recent months, we’ve seen improvement in rates, affordability, and for sale inventory, with monthly home price growth moderating on a seasonally adjusted basis,” Walden concluded. “While we are still out of sync with historical norms on multiple fronts, each of those metrics have at least been moving in the right direction.”
This months’ research report showed that today’s market remains interest-rate-driven; a rebound in affordability increased purchase mortgage demand, comparable to levels seen last summer when interest rates were at a similar rate.
As Walden explains, the refinance market has also seen some modest improvement, with the potential for more growth throughout the year.
“While the mortgage market remains overwhelmingly purchase-centric, refinance incentive is rising, albeit slowly, alongside easing interest rates,” Walden continued. “Since interest rates peaked back in October, we’ve seen a threefold increase in the number of mortgage holders who could reduce their first lien rate by at least 75 bps with a rate/term refi. And while that population stands at roughly 1.7 million—up from 520K last fall—it is still a historically small number. Should rates fall to 6% by year’s end as current forecasts suggest, the number of borrowers with refinance incentive would rise, particularly among 2023 vintage originations.”
“Under that scenario—a potential needle mover for the refinance market—some 46% of 2023-vintage borrowers would be ‘in the money,’ with nearly a third able to cut a full percentage point off their current rates. As more legacy mortgages regain rate incentive as well, the overall ‘in the money’ population would more than double to 3.8 million by the end of the year, with nearly 60% of that growth coming from loans originated in 2023.”
“Originators would do well to identify and engage with these potential customers now. Of course, what’s good news for mortgage originators simultaneously heightens prepayment risk in the capital markets” Walden concluded. “Getting a granular, daily view of prepay activity will become essential this year as investors navigate an extremely rate-sensitive and volatile market.”
Additionally, February’s data shows that aggregate American mortgage holder equity ended the 2023 calendar year at $16 trillion—gaining 11%, or $1.6 trillion, over the year to reach the highest level on record.
The average mortgage holder now has $299K in equity, up from $274K at the end of 2022. Such historically high equity levels create the conditions for an upswing in equity lending when interest rates ease enough to make withdrawals more attractive to homeowners. Two thirds of all equity is held by borrowers with credit scores of 760 or higher, offering lenders a likewise appealing, lower-risk cohort to whom they can offer equity-based products.
Click here to see the report in its entirety.
