ICE July data shows rising use of affordability products as home prices cool and risks grow
A growing number of homebuyers are relying on adjustable-rate mortgages (ARMs) and temporary buydowns to cope with elevated interest rates, according to a new report by ICE Mortgage Technology.
The report shows that more than 8% of borrowers this year have financed homes using ARMs or temporary buydown structures, reflecting widespread efforts to lower monthly payments during the early years of a loan. These products have become a go-to solution for buyers looking to manage affordability challenges amid high borrowing costs, but the report also warns of potential risks.
ICE noted that while these structures offer short-term payment relief, they may lead to payment shock later, particularly if rates remain high or reset even higher in future years.
The 15-year FRM averaged 5.80% as of July 03, down from the previous week when it averaged 5.89%, according to Freddie Mac. A year earlier, the 15-year rate was 6.25%. Meanwhile, the 30-year FRM was 6.67%.
Home prices slow
ICE’s Home Price Index indicates that annual home price growth has cooled to 1.3% as of early June. Roughly 30% of the largest housing markets have seen prices decline by at least one percentage point from recent highs.
This deceleration may help with affordability in theory, but ICE cautioned that it could erode the equity positions of borrowers who purchased more recently, especially those who used low-down-payment loans such as FHA and VA products. ICE data shows that one in four seriously delinquent loans nationwide would be in negative equity if sold at distressed prices.
Some local markets are already experiencing sharper effects. In Cape Coral, Florida, 27% of all 2023 and 2024 vintage loans are currently underwater. In Austin, Texas, 18% of loans originated in 2022 have fallen into negative equity territory.
“Borrowers with minimal equity — particularly those who purchased recently — are often the first to be exposed when home prices soften,” said Andy Walden, head of mortgage and housing market research at ICE. “These early signs of stress highlight the importance of monitoring borrower-level risk as market conditions evolve.”
ICE also flagged the resumption of federal student loan payments and collections in May as another source of financial pressure. Based on ICE McDash and TransUnion Tradelines data, nearly 20% of mortgage holders also carry student loan debt, and that share jumps to nearly 30% for FHA borrowers.
Borrowers who are delinquent on their student loans were found to be four times more likely to be delinquent on their mortgages, making student debt a significant contributing factor in housing instability.
CRT securitizations begin to feel the impact
The recent shifts in home prices are starting to show up in credit risk transfer (CRT) securitizations, according to the report. Most CRT deals issued in 2023 and 2024 have seen modest increases in negative equity rates over the past few months.
“As figures from the July Mortgage Monitor bear out, national averages don’t tell the full story,” said Tim Bowler, president of ICE Mortgage Technology. “We’re seeing early signs of risk building within specific markets and within specific borrower populations, like borrowers with limited equity or who are behind on student loans.”
“This is when proactive monitoring and data-driven risk management become essential. Identifying and engaging these borrowers early may prevent hardship later.”
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