PLEASANTON, Calif. — A brief decline in mortgage rates early this year opened refinance opportunities for nearly five-million homeowners and pushed housing affordability to its best level in four years, according to a February 2026 Mortgage Monitor Report released by ICE Mortgage Technology.
Mortgage rates fell to an average of 6.04% in early January, giving about 4.8 million borrowers the chance to refinance into lower monthly payments, ICE said. That marked the largest pool of refinance-eligible borrowers since early 2022 and represented a 20% increase from late last year.
ICE said nearly 1.3 million mortgages — including more than 500,000 originated in 2025 — carry rates between 6.875% and 6.99%, making them particularly sensitive to modest rate declines. Data from the Mortgage Bankers Association showed refinance activity reached a 17-week high in the week ending Jan. 16, with refinances accounting for 62% of all mortgage applications. ICE estimates roughly two-thirds of those loans were rate-and-term refinancings.
Many Remain Locked In
Despite the uptick, most homeowners remain locked into lower-rate loans. At the start of 2025, about 39.4 million borrowers had mortgage rates below 5%, including 12.6 million below 3%. By year-end, those figures slipped to 37.2 million and 12.1 million, respectively, meaning roughly 95% of low-rate borrowers held onto their existing mortgages.
“Even small reductions toward 6% rates can significantly boost affordability, particularly for homeowners who could refinance into a lower rate and monthly payments,” Andy Walden, ICE’s head of mortgage and housing market research, said in a statement.
When rates hit 6.04% on Jan. 9, the number of homeowners able to refinance jumped 20% and affordability reached its strongest point in four years, Walden said, though he added that affordability remains strained by elevated home prices relative to incomes.
Affordability Improves
According to the new ICE report, housing affordability improved as the monthly principal-and-interest payment needed to buy the average-priced home fell $164 from a year earlier to $2,091, reducing the share of median household income required to 27.8%. Still, the national home-price-to-income ratio remains about 4.8-to-1, above the long-term average near 4-to-1.
ICE also reported that more than 1.1 million homeowners ended 2025 underwater on their mortgages, the highest level since early 2018. Negative equity was concentrated among Federal Housing Administration and Department of Veterans Affairs loans originated in 2022 or later, with several Southern markets now seeing more than 10% of mortgaged homes underwater.
Delinquencies Decline
National mortgage delinquencies declined 16 basis points in December to 3.68%, ICE said. Early-stage delinquencies improved, but loans 90 days or more past due increased by 30,000 to their highest level in nearly three years.
U.S. home prices rose just 0.6% in 2025, the smallest annual gain since 2011, as relative stability in the Northeast and Midwest was offset by declines in the South and West.
