The newest data on outstanding residential mortgages has been released via the Federal Housing Finance Agency (FHFA)’s National Mortgage Database. It tells a pretty strong story on the financial strength of the American homeowner.
Even after three years of rising interest rates and a painful housing market recession, the lasting effects of the post-pandemic boom still dominate the average American’s financial condition. Forty percent of homeowners have no mortgage at all — a staggering number. And for the homeowners who hold mortgages, they remain in outstanding shape.
After many years of consistent home-price appreciation, the average loan-to-value (LTV) ratio across all outstanding mortgages in the U.S. is 46.9%. That’s down from 70% in 2013. It’s a massive cash cushion that will prevent a lot of unfortunate situations if the economy slows under the new Trump administration’s policies.
In fact, 82% of mortgage holders have at least 30% equity in their home. Even in a market where home prices dip — which could indeed happen in 2025 — almost no existing homeowners are at risk of being underwater. At the end of 2024, the FHFA reported that 0.3% of borrowers have negative equity.
Beyond the large equity cushion, the low fixed mortgage rates that dominate the landscape are another advantage for existing homeowners. It’s hard to overstate how low the debt payments still are for this group. At the end of 2024, 82% of mortgages carried a rate below 6% and a whopping 54% of mortgages have a rate below 4%.
These ultra-low payments carry weight in a slowing economy. In many recessionary cycles, homeowners who lose their jobs are forced to sell their homes. If the home is underwater and the time it takes to sell is very long, these homes may go into foreclosure rather than being sold on the open market.
But in this cycle, the mortgage may be the best financial asset that the consumer owns. If you lose your job, but you’re one of the 27 million homeowners with a 2% or 3% handle loan, then your mortgage payment is cheaper than any alternative. It’s cheaper than renting and it’s cheaper than downsizing.
These consumers will — and should — fight to keep their mortgage current, even at the expenses of other liabilities. This is an unprecedented dynamic in any pre-recessionary period we’ve ever experienced.
Monthly mortgage principal and interest payments — not including property taxes and insurance — are near long-term lows as a percentage of income across the homeowner spectrum, including those without mortgages. This debt load was as high as 9% during the housing bubble that burst back in the late 2000s. It’s now at 5.7%.
As a result of these terrific financial conditions, very few mortgage holders are in any stage of delinquency, although this tailwind is starting to fade a bit. The delinquency rate is creeping up as more borrowers have more expensive payments and it is more likely for these payments to be missed.
As of the fourth quarter of 2024, only 3.6% of all borrowers were in any stage of delinquency. The number of people with early-stage payment troubles — those who are 30 days late — has increased back to the still-low pre-pandemic levels of 2019.
Housing isn’t the only area of strength in the American economy in early 2025. There are other bright spots, as corporate profits are still high. Unemployment is still low. But these conditions can change quickly, especially with the heavy new tariffs being implemented.
And while home prices may dip with rising inventory and still-weak buyer demand, existing homeowners — with their ultra-cheap mortgages and very low levels of debt — may indeed be the one area to shelter the economy from the storm.
