(Bloomberg) — More older lower-rate mortgages are being replaced by newer borrowing with higher financing costs, gradually pushing up the average loan rate for US homes, Intercontinental Exchange Inc. data show.
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Four million first-lien mortgages originated since 2022 have a rate above 6.5%, and about 1.9 million these have a rate of 7% or higher, according to the ICE Mortgage Monitor Report.
“As of May, 24% of homeowners with mortgages now have a current interest rate of 5% or higher,” Andy Walden, vice president of ICE Research and Analysis, said in a statement. “As recently as two years ago an astonishing nine of every 10 mortgage holders were below that threshold.”
The active mortgage market is gradually shifting as people age out of their homes, retire or experience a life-changing event that compels the sale of a home with an older, lower-rate loan.
“All in, there are 5.8M fewer sub-5% mortgages in the market today than there were at this time in 2022,” Walden said. “This has been a slow-moving change, as borrowers with lower rates have sold their homes or, to a smaller degree, refinanced to withdraw equity.”
A greater share of homes with loans closer to the prevailing rate will likely spur more churn in the real estate market as more people become willing to relocate for a job or other opportunity, and less fearful of losing a fixed-loan rate mortgage.
Homeowners with a mortgage closer to prevailing rates will also likely boost the refinance market when the Federal Reserve starts cutting rates later this year as expected.
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