ICE Mortgage Monitor: As Tappable Equity Hits Record High of $11.5T, 3 of 5 Mortgage Holders Have at Least $100K to Borrow Against
- Even as outstanding mortgage debt hit an all-time high of
- Climbing equity has eased overall leverage in the market, with total mortgage debt equivalent to 44.1% of underlying home values, down from 44.6% in Q1 and the third lowest leverage ratio of the past 20+ years
- Tappable equity – the amount a borrower can access while maintaining a healthy 20% equity cushion – also hit a new peak in June at
- 32M mortgage holders have at least
- Borrowers with 760+ credit scores hold two-thirds of tappable equity; a similar share is held by those with sub-4% first lien rates, an inherent incentive to use second lien debt to tap equity, should the need arise
- Fewer than 325K homeowners are underwater nationwide, representing just 0.60% of active mortgages, with another 4.2% having less than 10% equity in their homes
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- Nationally, 84% of underwater mortgages were originated within the past 3.5 years; that share climbs above 97% in markets where prices have pulled back from recent highs
Though the ICE Home Price Index (HPI) has shown a general slowdown in the rate of home price growth through June – and in some locales, price declines driven by surplus inventory – mortgage holders’ equity levels continue to hit new heights. As
“Outstanding mortgage debt, including both first and second liens, hit an all-time high in June, but growth in home prices has outpaced that gradual rise in debt,” said Walden. “Total cumulative debt leverage – essentially a loan-to-value ratio for the entire mortgage market – is equivalent to 44.1% of underlying home values, the third lowest leverage ratio we’ve seen in the past 20-plus years. Rising home prices have also continued to build the fortunes of existing homeowners, pushing tappable equity – the amount a mortgage holder can leverage while retaining a healthy 20% equity cushion – to its highest level ever.”
Nine out of ten of mortgage holders (48.5M) have some degree of tappable equity. A fair representation of the addressable market for second lien lending, tappable equity continues to be held primarily by higher credit score borrowers with low first lien interest rates. Two-thirds of such equity is held by mortgage holders with credit scores of 760 or higher, with a similar share held by those with first lien rates below 4%.
Three out of five (32M) mortgage holders have at least
“Home equity lending has been sluggish since interest rates began their climb higher early in 2022,” Walden said. “As the Fed raised short-term lending rates, accessing equity became more expensive for homeowners, evidenced by the anemic growth in such lending despite record levels of available, tappable equity.
“Industry expectations that the Fed will soon begin easing short-term rates could gradually change that dynamic, given the more direct impact short term rates have on home equity rate offerings, and lenders would do well to prepare. The ability to originate and service home equity loans alongside first lien mortgages will be key – to say nothing of using data-driven portfolio analysis to identify potential second lien customers.”
Fewer than 325K homeowners are underwater on their mortgages nationwide, putting just 0.60% of active loans in a negative equity position, with another 4.2% holding less than 10% equity in their homes. That said,
In
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
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
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