About 1.3 million loans – including more than 500,000 originated in 2025 – carry rates between 6.875% and 6.99%, the group most sensitive to the latter rate decreases. ICE pointed to data from Mortgage Bankers Associationfound that refund activity hit a 17-week high in the week ending Jan. 16, with funding making up 62% of all applications. ICE estimates about two-thirds of these were rate-and-term refis.
But the locking effect remains strong. At the beginning of 2025, 39.4 million homeowners had mortgages of less than 5%, including 12.6 million with rates of less than 3%. By the end of 2025, those numbers were 37.2 million (-6%) and 12.1 million (-5%), meaning that nearly 95% of subprime borrowers continued to hold on to their existing loans.
“Even a small reduction to 6% can significantly increase affordability, especially for homeowners who may be able to refinance into lower rates and monthly payments,” Andy Walden, head of housing and housing market research at ICE, said in a statement.
“When rates hit 6.04% on January 9th, the number of homeowners in renovations increased by 20% and affordability reached its highest level in four years. That said, affordability remains a legal challenge, as home prices are still elevated relative to incomes and with significant differences across regions and borrower classes.”
“Today’s market is full of cross-currents — borrowers responding quickly to rate shifts, affordability improving for some but not others, and pockets of growing credit stress,” said Bob Hart, president of ICE Mortgage Technology. “Our end-to-end mortgage platform helps servicers and lenders understand those moving parts and take advantage.”
Mortgage performance
Affordability improved in early January as the monthly payment and interest required to purchase an average-priced home fell $164 year over year to $2,091, lowering the share of household income required to afford it to 27.8%.
Still, the national income-to-income ratio remains at about 4.8 to 1, above the long-term average of about 4 to 1.
More than 1.1 million borrowers ended 2025 under water, the highest level recorded since the beginning of 2018. Negative equity was more concentrated in the middle Federal Housing Administration (FHA) and US Department of Veterans Affairs (VA) loans started in 2022 or later, ICE said.
On a regional basis, several markets in the South now have mortgages more than 10% underwater, although national equity levels remain historically strong.
ICE reported that the national crime rate decreased 16 basis points (bps) in December, falling to 3.68%. Initial delinquencies improved, but 90-day delinquencies rose by 30,000 and are now at their highest level in nearly three years – 19,ooo more than this time last year.
US home prices rose 0.6% in 2025, the smallest annual increase since 2011. The Northeast and Midwest showed relative stability, while declines in the South and West weighed on the national average.
