Softening mortgage rates pushed October prepayments to their highest level since early 2022, signaling strong borrower activity
Falling mortgage rates in October spurred a surge in refinancing activity, with homeowners seizing the opportunity to lock in lower monthly payments and push prepayments to levels unseen in three-and-a-half years.
According to ICE Mortgage Technology's latest market data, the single month mortality rate, which measures prepayments, rose 27 basis points to 1.01% in October. That's the highest prepayment level since mid-2021.
"This trend was largely driven by people who purchased homes at elevated rates in recent years seizing the opportunity to lower their monthly payments," said Andy Walden, head of mortgage and housing market research at ICE.
The refinance surge underscores a broader trend of borrower activity across the United States market, as households look to restructure their debt in a gradually normalizing rate environment.
A 16-basis-point increase from October 2024, when rates occupied similar levels, suggests growing borrower engagement and improved financial positioning.
Beneath this refinance wave, the overall health of the mortgage market remained stable. The national delinquency rate improved by 7 basis points to 3.34% in October, continuing a downward trajectory that placed it 11 basis points lower than October 2024 and 53 basis points below pre-pandemic October 2019 levels.
Performance strengthened across the board, with both early-stage and late-stage delinquencies declining.
Foreclosure activity, however, sent a conflicting signal. While October foreclosure starts slowed by 9.8% from September, the year-over-year trend continued its rise.
Foreclosure inventory climbed 19% year-over-year to approximately 37,000 additional loans, while foreclosure sales increased 32%.
"Overall mortgage health remains solid, with continued improvement in delinquency rates across all stages," Walden said.
"While foreclosure activity has ticked up, levels remain historically low."
The uptick in foreclosures was concentrated in government-backed loans. FHA foreclosures surged 50% year-over-year, while VA foreclosure activity resumed following last year's moratorium, driving the rise in overall government-loan foreclosure activity to its highest level since early 2023.
The takeaway suggests a housing market in transition. Refinancing demand indicates borrower confidence and debt-restructuring activity, while stable delinquencies reflect credit quality that remains intact.
But rising foreclosures, though contained to government programs and historically low in absolute terms, flag emerging stress in select borrower segments entering the final months of 2025.
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