Mortgage cushion

US homeowners have substantial equity built up in their homes. As of Q4 2023, 57.6% of the outstanding principal balance on residential mortgages are mortgages with a loan-to-value of less than 60%. The loan-to-value ratio works like this: if the house is worth USD 500,000 and there is USD 300,000 left to repay, then there is USD 200,000 in equity. Only 0.4% of the outstanding mortgage balance has a loan-to-value over 100% i.e., the house would be sold and there would still be debt left to pay. Somewhat concerning is the increase in the share of 90.1% to 100% loan-to-value mortgages from 3.3% in 2022 to 6.0% in Q4 2023. Nonetheless, 86.6% of US homeowners can withstand a 20% drop in house prices and still have equity in their homes.

Source: US Federal Housing Finance Agency, April 2024.