The ongoing uptick in U.S. home values has pushed tappable equity close to its 2022 peak, but homeowners aren’t taking advantage due to the high interest rate environment, according to new data from Intercontinental Exchange (ICE). 

Per the December ICE Mortgage Monitor Report, mortgage holders across the country collectively hold $10.6 trillion in equity that could be accessed while still keeping a 20% equity stake in their homes. But only 0.41% of the tappable equity available at the start of the third quarter was withdrawn during this three-month period, representing less than half of the average withdrawal rate from 2010 to 2021. 

Consider that, throughout those years (which encompassed a variety of rate and market conditions, ICE noted), Americans with mortgages consistently withdrew slightly less than 1% of available tappable equity each quarter. 

“Despite the resurgence in tappable equity among U.S. mortgage holders, elevated interest rates are making homeowners reluctant to extract that wealth,” said Andy Walden, vice president of enterprise research for ICE. The untapped equity, Walden said, is “equivalent to $54 billion to $250 billion over the last 18 months in ‘missing’ withdrawals that might have otherwise stimulated the broader economy.” 

On the other hand, the growth in equity levels are playing a part in holding down default and foreclosure activity. Foreclosure starts grew to an 18-month peak in October, but they remain 35% below pre-pandemic levels.  

“Lenders and servicers have many more options for working with borrowers to avoid foreclosure today than at almost any point in the past,” Walden said. “Just to illustrate the scope: 70% of loans currently three or more payments past due are protected from foreclosure by ongoing loss-mitigation efforts. Further, 58% of these seriously delinquent mortgage holders hold more than 20% equity stakes in their homes.” 

Borrowers with large equity cushions have more incentive to work with servicers to keep their loan accounts in good standing, Walden said. They also have more options for avoiding distress, such as saving the equity they’ve earned through a traditional home sale rather than going through foreclosure. 

“The more the industry can do to educate and update borrowers as to their equity positions, the better,” he said. “Loss mitigation can be much more successful when a borrower can make educated and informed decisions, fully aware of the options available to them.”