(Bloomberg) — The average U.S. mortgage rate is gradually rising as older, lower-interest mortgages are being replaced by newer loans that are more expensive to lend, according to data from the Intercontinental Exchange.
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According to the ICE Mortgage Monitor report, 4 million first-lien mortgages originated in 2022 and beyond have interest rates above 6.5%, with about 1.9 million of those having interest rates above 7%.
“As of May, 24% of homeowners with mortgages currently have interest rates above 5%,” Andy Walden, vice president at ICE Research and Analysis, said in a statement. “It's astonishing to think that just two years ago, 9 in 10 mortgage holders were below this threshold.”
The active mortgage market is slowly changing as people age out of their homes, retire or experience life-changing events that force them to sell their older, lower-interest mortgaged homes.
“Overall, there are 5.8 million fewer mortgages below 5% on the market today compared to the same time in 2022,” Walden said. “This is a slow change as low-rate borrowers sell their homes or refinance to extract smaller amounts of equity.”
A rise in the share of homes with mortgages close to prevailing interest rates is likely to create more liquidity in the real estate market, as people become less worried about losing their fixed-rate mortgages and more willing to relocate for jobs or other opportunities.
If the Federal Reserve begins cutting interest rates later this year as expected, homeowners with mortgages at near-current rates are also likely to stimulate the refinancing market.
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