Key facts
- 82.8% of homeowners with a mortgage hold a rate below 6%.
- Every point market rates exceed a homeowner's existing rate reduces sale probability by 18.1%.
- The fully loaded cost to originate a loan averages $11,898.
- Servicing income ranges between 25 and 55 basis points annually per loan.
- CrossCountry Mortgage's loan loss rate among past customers is around 61.4%.
- PennyMac's loan loss rate among past customers reaches 81.35%.
The widening gap between current mortgage rates and homeowners' existing low rates is significantly impacting the housing market, as the 30-year mortgage rate has surpassed 7% for the first time since May 2025. This situation effectively locks millions of homeowners into their current mortgages, reducing their incentive to sell or refinance. Freddie Mac's weekly survey shows the average 30-year rate at 6.76%, with the 10-year Treasury yield also nearing 5% ahead of an anticipated Federal Reserve meeting.
Data from Redfin indicates that 82.8% of homeowners with a mortgage hold a rate below 6%. Research cited by the Federal Housing Finance Agency suggests that for every percentage point market rates exceed a homeowner's existing rate, the probability of a sale decreases by 18.1%. At the current 7% threshold, this gap is wider than it has been for many households, creating a significant barrier to transactions.
This dynamic challenges traditional lender strategies. Companies like Costco and JPMorgan Chase are highlighted for their focus on building "durable customer relationships" and increasing their share of a customer's economic wallet through a "horizontal strategy" that spans various financial products. This contrasts with a "vertical strategy" that aims to control more of the homebuying transaction from start to finish.
The question of "customer ownership" is complex, with various parties—realtors, brokerages, loan originators, mortgage brokers, lenders, servicers, and builders—each claiming a connection. A more pertinent definition of ownership may be who possesses a durable relationship with the customer, including the necessary data, relevance, and permissioned access. Regulations like the Homebuyers Privacy Protection Act, the FTC’s Telemarketing Sales Rule, and the Telephone Consumer Protection Act define the parameters of these permissioned relationships.
Financially, the cost to originate a loan averages $11,898, with a significant portion going to compensation. Retaining customers is crucial, as servicing a loan generates annualized income typically ranging from 25 to 55 basis points. This servicing portfolio also represents an "option on the next transaction" at a fraction of the cost of acquiring a new customer. The sale of servicing portfolios in 2022 and 2023, viewed narrowly as cash for avoided expenses, may have overlooked the long-term value of retaining the customer relationship. The Federal Reserve's 50 basis point rate cut in September 2024 saw a large portion of refinance volume flow to the top ten servicers, indicating that lenders who sold their servicing portfolios may have sold the customer rather than just the asset.
Customer leakage, the rate at which past customers finance with competitors, is measurable. CrossCountry Mortgage, Guild, and PennyMac show loan loss rates of 61.4%, 47.82%, and 81.35% respectively among their returning customers, highlighting a significant opportunity for lenders to improve retention through better data utilization and engagement.