September 2025
Fixed Income Monthly Report
Chris Edmonds
President, Fixed Income & Data Services, ICE
Property insurance costs: understanding a major headwind for U.S. housing
It’s no secret that the continued (seemingly limitless) rise in the cost of housing is making homeownership harder for first-time buyers across many of the world’s advanced economies. The United States is no exception: American homeowners are spending 31% of their monthly income on mortgage payments as of September 2025, according to ICE Mortgage Technology (IMT). To put that figure in perspective, mortgage payments consumed just 16% of U.S. borrower incomes in January 2013.1
One element of home affordability is the role played by soaring property insurance costs, which have climbed 69% in the past five-and-a-half years.
Figure 1. Change in average principal, interest, taxes and property insurance payments over time for mortgaged single-family homes observed in the ICE McDash database
Source: ICE Mortgage Technology
As the chart illustrates, average property insurance payments have risen more than twice as quickly as the increases in principal payment (+23%), interest (+27%), and property taxes (+27%) since 2019. Per IMT data, the average single family mortgage holder in the U.S. now pays nearly $2,370 a year for property insurance, which accounts for a record 9.6% of average mortgage-related expenses.
What’s driving this price inflation? The cost of property insurance is affected by a number of different factors. The first is home prices: insurance premiums are tied to the amount of coverage, which is set by the value of the home, and home values have risen dramatically over the past five years. The average U.S. home sold for $371,000 at the start of the COVID-19 pandemic, but by the second quarter of 2025, that same average home cost $512,800.2 As home values increase, the amount of insurance coverage purchased generally also increases — leading to a rise in premiums even if all other factors remained constant. This effect was compounded by inflation, which proved particularly impactful on home prices during 2021 and 2022.3
State regulations can also play a significant role in insurance costs for homeowners. California has historically had relatively tight rate regulations, for example, but recent changes may be contributing to rising home insurance costs across the state.4 Insurance policy details are also important since changes in deductibles or coverage for specific hazards can impact premiums. An upcoming ICE analysis finds that average deductibles (measured as a percentage of coverage amount) associated with newly originated loans have been increasing over the past few years, suggesting that some new homebuyers may be reducing their insurance costs by selecting higher deductibles.
Finally, local and regional environmental hazards - including extreme weather events and exposure to climate risks - are a fourth factor propelling insurance costs. Looking at a map of the contiguous U.S. and where insurance prices have risen the fastest during the first six months of 2025, we can see the correlation between recent natural disasters and spiking costs.
Change in average insurance payment by market
(December 2024 - June 2025)
Change in average property insurance payment
(December 2024 - June 2025)
Figure 2. Change in average property insurance payment by local market, December 2024 - June 2025
Source: ICE, McDash, +Property Insurance
Cities in California - and particularly Los Angeles, which was ravaged by wildfires in January 2025 - have seen insurance costs leap by up to 9% in just the past six months, almost double the 4.8% property insurance increase ICE has seen nationwide since the start of the year (see Figure 2).
The story is similar in North Carolina, with cities like Charlotte and Raleigh seeing property insurance costs rise by ~8% after Hurricane Helene devastated the western portion of the state in September 2024.
The data is a further indication of the increasing weight that climate risks are having in the pricing of property insurance - and comes at a time when extreme weather events are making it harder for many homeowners to access insurance. Since 2018, more than 1.9 million insurance contracts have been dropped nationwide, particularly in parts of the country with high wildfire and hurricane risk.5
As private property and casualty insurers have retreated, homeowners have increasingly turned to state-backed insurance plans for property coverage. In North Carolina, utilization of state-backed insurance has reached 7%, up from 4% in December 2015, and utilization of state-run schemes is at 5% in California, up from just 1% a decade ago.6
With markets pricing in a 25-basis point rate cut at the Federal Reserve meeting this month, falling interest rates - with expected additional cuts in 2026 - may offer homeowners some relief on housing costs. Yet, for many mortgage holders, the insurance portion of their monthly payment seems assured to keep climbing.
1 ICE Mortgage Monitor, September 2025
2 Federal Reserve Bank of St Louis, Average Sales Price of Houses Sold for the United States
3 Ibid
4 Federal Insurance Office, U.S. Department of the Treasury: Analyses of U.S. Homeowners Insurance Markets, 2018-2022: Climate-related risks and other factors
5 The New York Times: Insurers Are Deserting Homeowners as Climate Shocks Worsen, December 18, 2024
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