A whopping 5.4 million homeowners are currently eligible to refinance their mortgages, thanks to lower mortgage rates. And, during the fourth quarter of 2025 (Q4/25), more than 10% of them (565,000) did refinance, according to the March Intercontinental Exchange (ICE) mortgage monitor.
Refinance to Save Money
"Activity was concentrated among recently originated loans, with the average rate-and-term refinancer carrying a $510,000 balance and reducing their monthly payment by $248," said ICE. Rate-and-term refinancing happens when a borrower takes no cash out of the transaction and instead benefits by reducing their monthly payment through a lower mortgage rate or by adjusting the duration of the loan.
The popularity of refinancing recent mortgages makes sense. The average rate for a 30-year fixed-rate loan peaked at 7.79% in October 2023 and only in the last couple of weeks dipped slightly below 6%, according to Freddie Mac's archive of weekly averages. Anyone refinancing from a rate above, say, 6.5% (the average rate was exactly 6% during the most recent week before this was written) may well find they can make worthwhile savings.
Refinance to Tap Equity
Although most refinancers in Q4/25 chose rate-and-term transactions, plenty of others wanted to cash in some of their equity. They tapped into $52 billion that quarter and $205 billion over the whole of 2025.
Of the annual total, $89 billion was extracted through cash-out refinances, and $116 billion via second mortgages, meaning home equity loans (HELOANs) and home equity lines of credit (HELOCs).
Cash-out refinances involve replacing one's existing mortgage with an entirely new one. So, it's typically wise to do so only when refinancing to a lower rate.
With a second mortgage, one keeps their existing loan and takes out a second, leaving the original at its current interest rate. If one has a lower mortgage rate than currently available — and millions of homeowners do — it's usually wise to opt for a HELOAN or HELOC.
Homeowners in Great Shape
Readers may have gulped when they read that homeowners extracted $205 billion in equity last year. That's a scary amount. Does it mean the sky's falling in?
Not at all. "Homeowners continue to hold nearly $17 trillion in total equity, with approximately $11 trillion considered tappable," says ICE. So, in terms of cumulative equity, $205 billion is a drop in an enormous ocean.
"Tappable" means that homeowners have enough equity to refinance, even after leaving behind the equity cushion that lenders generally insist borrowers retain. Only a few can borrow the full value of their home.
Clouds on the Horizon?
Earlier this week, Cotality published its home price insights report for March. And it found that, as a nationwide average, home prices just inched higher by 0.7% over the 12 months ending on Jan. 31. A year earlier, they were rising at an annual rate of 3.5%.
On Wednesday, the Bureau of Labor Statistics published the consumer price index for February. It showed prices rising at a 2.4% annual rate.
When a home is increasing in value by 0.7%, and inflation is running at 2.4%, the owner is actually losing money in "real terms," meaning after inflation. In other words, someone selling the average home in January would be able to buy fewer goods and services with the proceeds than a year earlier.
Of course, there are wide variations around the national average, especially in the housing market. Cotality suggests the Northeast and Midwest are still seeing faster home price growth than elsewhere, although there may be cold spots even within those regions. Conversely, some other areas across the country may have experienced zero or negative home price growth during those 12 months.
A Window of Opportunity?
If home prices continue to fall in real terms, the value of homeowners' equity will erode. If their growth continues to slow at its current rate, home prices might even begin to fall in dollar terms as well as real terms.
Meanwhile, some economists have expressed inflation concerns centered on the conflict in Iran. Higher oil prices tend to drive prices of all goods and services upward. And higher inflation almost invariably leads to higher mortgage rates.
Nobody can predict with absolute certainty what will happen to the economy, inflation, interest rates and home prices. However, homeowners who have been considering tapping some of their equity might want to take into account the possible effects of those dark clouds.
Bottom line: It may be more beneficial to act sooner rather than later.
