U.S. homeowners are increasingly tapping their housing wealth, with equity extraction reaching its highest first-quarter level in five years, according to ICE's Mortgage Monitor report. During the first quarter of 2026, equity withdrawals climbed 2% year over year, marking the strongest Q1 pace since 2021. The trend underscores a shift in borrowing behavior as elevated mortgage rates persist.
More than half—54%—of all equity extraction came through second liens, such as home equity loans and home equity lines of credit (HELOCs), as borrowers sought to preserve the low first-mortgage rates secured during the pandemic-era refinancing boom. Cash-out refinance withdrawals reached their highest first-quarter level since 2022, while second-lien withdrawals posted their strongest first-quarter performance in nearly two decades, ICE reported.
The increase in equity extraction contrasts with a broader slowdown in mortgage activity. The Mortgage Bankers Association reported on June 3 that mortgage applications fell 2.5% for the week ended May 29, extending a period of subdued demand. ATTOM's first-quarter mortgage origination report showed total residential mortgage originations dropped 13% from the previous quarter to 1.57 million loans, as affordability pressures weighed on borrowers.
Purchase lending was particularly weak. ATTOM found that home-purchase loan originations fell 19% from the fourth quarter to 581,261 loans, the lowest quarterly level since 2014. Elevated home prices and higher borrowing costs continued to sideline many prospective buyers, despite persistent demand for housing. The diverging trends highlight a market increasingly defined by existing homeowners rather than new entrants.
While prospective buyers face affordability challenges and reduced purchasing power, homeowners who accumulated substantial equity gains over recent years are finding ways to access cash without giving up favorable mortgage rates. That dynamic has helped sustain demand for second-lien products even as traditional refinancing activity remains constrained. For lenders, the growing appetite for equity-based borrowing represents one of the few bright spots in an otherwise subdued mortgage environment.
The broader housing landscape remains uneven. Alongside slowing originations, ATTOM recently identified a number of metropolitan areas facing elevated housing-market risk, reflecting ongoing concerns around affordability, economic uncertainty and shifting borrower demand. Advisors may want to consider how these trends affect client portfolios, particularly for those with exposure to real estate or mortgage-related assets. For more on housing affordability challenges, see Surveys Reveal Aspiring Homebuyers Eye 50-Year Mortgages, 401(k) Withdrawals Amid Affordability Crisis.
Meanwhile, the broader wealth management landscape is seeing shifts in alternative investments. For instance, Nontraded BDCs See First-Ever Quarterly Net Outflows as Redemptions Hit $6.9 Billion, signaling changing investor sentiment. Additionally, U.S. Annuity Sales Top $100B for Tenth Straight Quarter as RILAs Surge 21%, highlighting continued demand for guaranteed income products.
