Keeping tabs on homebuyers’ growing expenses can help you be ready to capture that refinance
With mortgage rates in a slow, steady decline over the last couple of weeks, a wave of refinances could be on the horizon in the mortgage industry. And for many homeowners, it comes at a time when they need to use built-in equity to pay off a mountain of consumer credit card debt.
Last month, the Federal Reserve Bank of New York reported that household debt increased by $185 billion in the second quarter of 2025 to $18.39 trillion. As consumer debt mounts, it could present an opportunity for mortgage brokers who are keeping tabs on customers’ credit situations.
Satyan Merchant (pictured top), SVP of auto and mortgage business leader at TransUnion, said an opportunity may be there for brokers to be ready to help customers get their consumer debt under control.
If brokers can monitor a borrower’s payment-to-income (PTI) ratio and see that it is increasing due to returning student loan payments, rising property taxes, or insurance, it might show the broker that it’s time to reach out.
“I think one key is home equity loans or home equity lending, but the other is back to mortgage refinance,” Merchant told Mortgage Professional America. “And I think for mortgage brokers and the mortgage originators, it’s been tough sledding for the last couple of years when it comes to originations and especially refinance.”
Making a connection
Much has been made about the golden handcuffs of pandemic-era low mortgage rates as a reason homebuyers are not interested in refinancing their mortgage. However, Merchant believes the ability to wipe out high-interest consumer debt might make them break those handcuffs.
“If an originator is able to take a look at a consumer's file and start to see some of these increasing PTI behaviors, like increasing payments that they're taking on student loans,” Merchant said. “What might have been a motivating factor for refinance in the past, like locking in a lower rate or even cashing out to pay for a renovation, I think in the future, a consumer may not make that connection.”
In addition to consolidating debt, Merchant points out that many people also bought homes in the recent higher-rate environment. With the hope of lower rates over the coming months, combined with equity they’ve earned in those homes, those homebuyers may also look to refinance.
“They may not be thinking, ‘Hey, refinance your mortgage so that you can consolidate some debt, so that you can reduce your mortgage payment,’” he said. ‘I think that, as we've been in this higher interest rate environment for the last couple of years now, people are still buying homes. So there are more consumers out there in the market who have 6% or 7% 30-year loans.
“And if the economy moves in the direction and there are future rate cuts, we might get back to a world here in the next year where we're hopefully below 6% rates.”
Monitoring customer credit files
Brokers and originators might overlook some of those recent customers because rates haven’t changed significantly since they obtained their mortgage. But Merchant said some of them might have built enough equity in that time that if rates dip slightly, as they have lately, there could be a refi opportunity.
“We can say ‘We know that there are increases in monthly payments on the student loan side,’” Merchant said. “’We're seeing in the credit file that your bank cards are going up. Have you thought about a refinance to help consolidate some of that debt?’ There's a silver lining here where an originator can take this data and keep an eye on existing mortgage holders and see if they can help them out.”
Molly Boesel, a senior economist at Cotality, warns that a national increase in property taxes and a softening job market could be a sign of future financial distress for borrowers.https://t.co/jioRi2von7
— Mortgage Professional America Magazine (@MPAMagazineUS) August 13, 2025
Merchant notes that a significant amount of cross-account credit monitoring occurs in the bank card and auto loan spaces, but not as much in the mortgage space. Part of the reason has been the historically low delinquency rate in that area. However, with delinquencies creeping up, he encourages brokers and originators to start keeping a closer eye on customer credit issues.
“Keep an eye on what's going on so that they can hear that canary in the coal mine,” he said. “I think that's a practice that bank card lenders have always done, and more auto lenders do. When we were at less than 1% mortgage delinquency rates, I think a lot of mortgage servicers got away from that sort of monitoring, but we’re in a spot now where it's really important for them to do that.”
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