U.S. mortgage servicers are retaining refinancing borrowers at the highest rate in over three years, driven by a recent dip in interest rates that has spurred activity particularly among homeowners with loans originated between 2023 and 2025.
The December 2025 ICE Mortgage Monitor, released Tuesday by ICE Mortgage Technology, reveals that servicer retention rose to 28% in the third quarter of 2025, hitting a 3.5-year high. This surge is largely attributed to rate-and-term refinances, which accounted for 62% of all refinance activity in October, as borrowers seized the opportunity to lower monthly payments amid a volatile rate environment.
Non-bank servicers significantly outperformed traditional banks in retaining customers, keeping 35% of refinancing borrowers compared to just 13% for banks.
The data highlights a distinct advantage for non-banks in the current cycle, where speed and agility in identifying borrowers who would save money by refinancing appear to be critical factors. Retention rates were highest among Federal Housing Administration and Veteran Affairs mortgages at 36% apiece, while privately securitized loans saw the lowest retention at just 6%.
The market has seen a sharp pivot toward rate-and-term refinances — where borrowers replace their existing mortgage with a new one offering a lower interest rate without tapping into equity. This category reached its highest share of activity in nearly five years.
According to the report, 95% of these refinances in September and October involved loans originated between 2023 and 2025, allowing borrowers to reduce their rates by an average of 92 basis points and save approximately $200 per month.
“Modest rate relief this fall has driven mortgage application volumes to multiyear highs, showing the outsized impact that incremental affordability improvements have on borrower behavior and servicer retention opportunities,” said Andy Walden, head of mortgage and housing market research at ICE.
He noted that the market has become highly sensitive to small rate shifts, with hundreds of thousands of borrowers moving in and out of incentive windows daily.
While rate-and-term activity surged, homeowners looking to access cash took a different route. Second-lien home equity withdrawals climbed to their highest level since 2007, an 18-year peak.
Rather than refinancing their entire primary mortgage — which often carries a historically low rate from years past — borrowers are increasingly utilizing second liens to tap into equity as falling short-term rates make this option more affordable.
Contextualizing the broader economic picture, home affordability in mid-November reached its best levels since early 2023, with mortgage rates averaging 6.25%. However, affordability remains stretched: The monthly principal and interest payment for a median-priced home still consumes nearly 30% of the median household income.
Tim Bowler, president of ICE Mortgage Technology, emphasized the competitive nature of the current landscape. “In a sensitive rate environment, this limited shopping behavior amplifies the importance of being first to reach motivated borrowers,” he stated in a press release, referencing findings that 78% of borrowers only consider one or two lenders before making a decision.
