Servicers saw the retention rate for refinances fall in the second quarter to the second-lowest point in 17 years, ICE Mortgage Technology said in a new report. Companies managed to retain just 20% of homeowners opting to refinance, down from 25% three months earlier.
The older the loan, the more likely borrowers would refinance it elsewhere, ICE said. Servicers found more success with loans originated in the last two years with retention rates at 41% for 2023 originations and 34% for 2022 mortgages.
As homeowners look to save on their mortgages, servicers face growing competition in keeping them as their clients. With the number of refinances likely to grow, companies looking to capitalize have
Nonbanks saw their retention rate dip to 28% of refinancing borrowers in the second quarter, declining from 34% three months earlier. Meanwhile, the rate for banks inched down to 8%.
Still, with several recent findings from various researchers, including ICE, showing refinance volumes making a comeback once
The recent dip in mortgage rates "may have a positive effect on retention metrics in Q3," ICE's September Mortgage Monitor report said.
An
In mid August, 2.5 million borrowers stood to benefit from a refinance, with the number growing by another 2.3 million if rates fell by another half a percentage point, ICE said. Of the mid month total, 900,000 were regarded as highly qualified thanks to their credit scores, amount of equity held in their home and their likelihood of saving at least 75 basis points.
Borrowers quickly took advantage of opportunities, with refinance rate locks surging to their highest level in two years and more than doubling from earlier in the month.
The surge in activity also lifted the average refinance amount to spike in recent weeks, with the mean unpaid balance jumping to $348,000, up by over $50,000 from a few months earlier.
Earlier this summer, ICE noted the number of candidates in the money for a refinance was already at a near two-year high following
Chairman Jerome Powell's remarks following the meeting —
Elsewhere in the report, the latest trends pointed to elevated potential in the purchase market as well, but affordability will remain an obstacle, even with recent rate pullbacks.
"Purchase demand perked up on August's rate drops, hinting at a population of prospective homebuyers poised and ready to act as soon as market movements tip the affordability math in their favor," Walden said.
The share of median income needed to purchase an average American home currently stands at 34.1%, ICE said. A share above 25% is deemed unaffordable, according to the National Association of Realtors.
August purchase activity came in under levels from earlier in the year and 2023 when interest rates were comparable, "but that may well turn out to be a good thing on balance," Walden added.
"Slower home growth is a positive sign in the Fed's fight against inflation and increased – but still mild – demand is good for the market and Fed alike."
