by Mike Colpitts 
Refinances hit new highs as homeowners looking to pull cash out of their homes jumped to new levels.
- As mortgage rates drop after the Fed cut rates in December, the current rate on a 30 year fixed rate mortgage dropped to as low as 6.23%.
- More homeowners are seeking refinances as a result of the slower economy to have more security in cash for living expenses and other costs.
Mortgage rates dropped to the lowest level of 2025 in the last week of the year, driving mortgage refinances to hit new highs as homeowners shop for new mortgages to pull more cash out of their homes.
The current average refinance rate on a 30-year fixed-rate home loan is 6.23%. Tapping home equity is, however, a double edged sword as more homeowners increasingly take cash out of their homes than in the past decade.
Upfront costs like closing fees and points on a new mortgage make it costly for homeowners to refinance.
The 30-year fixed-rate mortgage averaged 6.15% as of December 31, 2025, down from the previous week when it averaged 6.18%. A year ago at this time, the 30-year FRM averaged 6.91%. The drop in rates hasn’t turned the U.S. housing market into a full out sellers market but it has produced an increase in home sales in some regions, including Fort Myers where home sales are bouncing back as home prices decline.
The 15-year fixed-rate mortgage averaged 5.44%, down from a week ago when it averaged 5.50%.
U.S. mortgage servicers are retaining refinancing borrowers at the highest rate in more than three years, driven by lower interest rates that has spurred activity particularly among homeowners with loans originated between 2023 and 2025.
The December 2025 ICE Mortgage Monitor, released last Tuesday by ICE Mortgage Technology, reveals that servicer retention rose to 28% in the third quarter of 2025, hitting a 3.5-year high. The surge is attributed to the combined 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 outperformed traditional banks in retaining customers, keeping 35% of refinancing borrowers compared to just 13% for banks as refinances hit new highs.
“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.
The mortgage market has become highly sensitive to small rate shifts, with hundreds of thousands of borrowers moving in and out of incentive windows daily. Borrowers shop for the lowest rate possible and tend to lock in mortgages when they are able to depending upon their own financial interests.
While rate-and-term activity surged, homeowners looking to access cash took a different route. Second-lien equity withdrawals jumped to their highest level since 2007, an 18-year peak.