ICE: Changing Mortgage Market
On Monday, Intercontinental Exchange, Inc. (ICE) released the October 2026 ICE Mortgage Monitor Report. Earlier that day, we wrote an update on adjustable-rate mortgages (ARMs). And given that those loans feature heavily in the new report, today we can bring readers even further up to date.
But before we get to that, let's look at other information in the new mortgage monitor.
HELOC Hike
The Federal Reserve hiked general interest rates 25 basis points (0.25%) last month, and homeowners with home equity lines of credit (HELOCs) will likely find their monthly payments moving higher soon, if they haven't already.
No increase in expenses is welcome while affordability issues stalk so many households. But with ICE calculating the median outstanding HELOC balance at $44,000, it believes the median increase in monthly payments will be only $9, which we hope won't distress many readers too much.
Borrowers Paying Upfront for Lower Mortgage Rates
With mortgage rates at their highest in three years (and in danger of hitting a 25-year high soon), according to Freddie Mac, it's no surprise home buyers are looking for ways to optimize their monthly payments. And ICE observes that happening right now.
One way of paying a lower rate is to purchase mortgage or discount points. One can make a lump-sum payment upfront to buy a lower mortgage rate, which means a lower monthly payment.
The formula isn't fixed, but each point, which costs 1% of the loan amount, typically reduces the mortgage rate by around 25 basis points (0.25%), and lenders often allow purchasers to buy up to three or four points. So, on a $400,000 mortgage, four points would cost $16,000 and reduce the mortgage rate to, for example, 6.40% from the 7.40% that Freddie says was the average as of October 8.
One can also pay for a temporary buydown, which is less costly, but lowers one's rate only during those tough first few years of the mortgage. With luck, rates will have fallen by the time the higher rate kicks in, and refinancing will be attractive.
Tactical ARMs
ICE says, "Just 1.05 million active ARM loans have reached their first reset and are operating as adjustable-rate loans. More than 90% of ARMs originated since 2022 remain in their introductory fixed-rate periods, while most post-reset ARMs were originated more than a decade ago and have already experienced rate adjustments during the 2022-2023 Fed tightening cycle."
As the name implies, ARMs are variable-rate loans, and so they will have been affected by last month's Fed rate hike. But ICE says that, even if the full 0.25% increase is passed on, the median impact on borrowers is likely to be $14 a month. However, more recent loans, which tend to have higher balances, might see a higher increase of, perhaps, $53 monthly on average.
Be aware that most commentators expect another Fed rate hike this year. The CME FedWatch tool measures the likelihood of upcoming rate movements, based on specialist investors' purchases of Fed Funds futures.
The chances of another increase at the Fed's next meeting on Oct. 28 are only 19.4%, according to the tool as of Oct. 9. But the probability increases dramatically for the following meeting on Dec. 9: 70% for another 0.25% hike on that date, and 16% for a larger, 0.5% rise.
The initial fixed-rate period ends in 2026 for about 150,000 ARMs, with another 180,000 scheduled to increase in 2027. "Among next year’s resets, roughly 74,000 7-year ARMs originated in 2020 are expected to see the largest median payment increase at approximately $1,066 per month, or 36%, reflecting their lower initial rates, higher balances and higher periodic rate caps," says ICE.
Affected readers might wish to start planning now.
Icy Housing Market
On Tuesday, Zillow Research published its September Market Report. Its gloomy headline read, "Winter Has Arrived Early in the Housing Market as Newly Pending Sales Fall 8.5%."
"Sky-high mortgage rates and the usual fall slowdown teamed up to chill housing activity in September," said the report. "Closed sales of existing homes fell 2.5% from a year earlier, according to Zillow's preliminary nowcast. Newly pending sales, a leading indicator of future closings, fell 8.5% year over year."
Zillow firmly pins the blame on high mortgage rates. And a recent forecast from the company expects existing home sales to fall 3.5% year over year during the final quarter of this year. Still, it thinks those sales will have increased 1.2% across the whole of 2026, compared with 2025.
There's better news for home buyers. The number of days a home remains on the market before selling is rising, as is the number of listings showing price cuts. So, there could be some motivated sellers offering great deals out there.
