Second-lien equity withdrawals approached 2008 levels in the recent first quarter, according to Intercontinental Exchange. Homeowners grabbed nearly $25 billion in home equity lines of credit, while overall first quarter equity withdrawals, including cash-out refinances, totaled $45 billion. 

Introductory rates on second-lien HELOCs fell below 7.5% in March, ICE said in its June Mortgage Monitor. The mortgage technology company is predicting HELOCs could dip into the mid-6% range by next year on par with the 30-year fixed-rate mortgage forecast, if the Federal Reserve moves forward with an anticipated three rate cuts.

"If the Fed moves forward with anticipated rate cuts, borrowing against home equity could become even more attractive in the second half of the year," said Andy Walden, head of mortgage and housing market research at ICE, in a press release. 

The monthly HELOC borrowing cost is still around $200 to $250 above long-term averages. But the average monthly payment a homeowner needs to borrow $50,000 has dropped about $100 from early last year to $311 at the end of the first quarter, ICE found. 

Notably, borrowers are still largely underutilizing their estimated $11.5 trillion in tappable home equity, accessing just 0.41% of that amount. In all, ICE assumes 48 million homeowners nationwide sitting on $17.6 trillion in total home equity. 

Lenders are still failing to retain customers

The findings also described the significant opportunity lenders are failing to grasp in meager retention rates. Just 23% of borrowers are returning to their servicer for a cash-out refi, and 26% going back for a rate-and-term refi. According to ICE, companies are retaining up to 43% of customers reworking home loans originated between the rising rate era of 2022 to 2024. 

The majority, or 77% of mortgage customers are still just considering one or two lenders for their home loan transaction, the company reported. While younger borrowers were more likely to shop, less than a quarter of them told ICE they would consider two or more providers. 

"It suggests retention rates could be much higher if lenders and servicers employed more sophisticated techniques to understand current market dynamics, identify borrowers with a higher propensity to refinance, and marketed the right products in the right place," the report said.

Market dynamics continue to cool

The housing market continues to soften amid relative unaffordability. The number of homes for sale is up 30% from last spring, and ICE predicts inventory to return to a pre-pandemic level by mid-2026. 

The report also found foreclosure metrics including starts, sales and inventory all rising annually for the second consecutive month, and delinquency marks ticking up slightly through the end of April. Last month's 6,500 foreclosure starts were driven by a spike in Department of Veterans Affairs-backed loans, where borrowers currently lack a partial claim option.