Homeowners insurance has quietly become one of the largest recurring costs layered onto a monthly mortgage bill. New research from the Federal Reserve Bank of Dallas finds that for the average homeowner nationally, the insurance premium now equals 14 percent of the monthly payment covering mortgage principal and interest, up from 10 percent in 2013. For a household counting on a fixed loan payment, that shift is a real and growing squeeze, even when the loan balance and interest rate never change.
The finding comes from a Dallas Fed economics article published in March 2026 by economists Shan Ge, Stephanie Johnson and Nitzan Tzur-Ilan, built on mortgage-level data covering roughly two-thirds of the U.S. mortgage market. The same research links rising premiums to a rise in mortgage delinquencies and to households relocating toward areas that are cheaper to insure, a pattern the economists describe as reshaping who can afford to stay in higher climate-risk communities and who eventually gets pushed out.
What the 14 Percent Figure Actually Counts
The 14 percent figure measures something specific: the homeowners insurance premium as a share of the monthly payment made up of mortgage principal and interest, for the average homeowner nationally, in 2025. The Dallas Fed research draws on ICE McDash mortgage-servicing data, which tracks the actual insurance premiums that mortgage companies collect and pay out of borrower escrow accounts, and which the Bank says covers about two-thirds of all U.S. mortgages. The figure isolates insurance against principal and interest; it does not fold in property tax, which many households also pay through the same escrow arrangement.
That distinction matters because a homeowner who has not refinanced, and whose principal-and-interest payment has not moved in years, can still watch the total bill climb every time the insurer resets the premium. An escrow account is what carries that change through: the lender estimates the coming year’s insurance cost, divides it by twelve, and folds it into the monthly payment automatically. Behind the shift in share is a steep run-up in the underlying premiums themselves. The Dallas Fed article puts the national increase in homeowners insurance premiums at about 70 percent from 2019 to 2025, tied to higher construction and repair costs and to a greater frequency of the catastrophic weather claims that insurers now price directly into rates.
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A $1,000 Premium Increase Makes Moving More Likely
Higher premiums do not just raise a bill; they change behavior. The research finds that a $1,000 increase in the annual insurance premium corresponds to a 0.54 percentage point increase in the probability that a household relocates, typically toward an area where insurance costs less. For households that make that move, the math tends to work out: the present value of the premium savings from relocating averages around $14,274 over 30 years, using a 6 percent discount rate. That is one concrete channel through which climate-linked insurance costs are starting to shift where people choose to live, favoring places insurers consider lower risk.
Premium Increases Are Also Driving Up Mortgage Delinquencies
Not every household facing a bigger premium can shop for a cheaper policy or afford to move. For those that cannot, the research finds a direct link between rising premiums and falling behind on the mortgage itself. The economists estimate that increases in insurance premiums pushed roughly 31,000 mortgages into delinquency in 2022 alone. The same squeezed households tend to lean more heavily on credit cards to cover the gap, carrying higher balances and higher utilization as insurance eats into money that would otherwise cover other bills.
The Delinquency Gap Is Projected to Widen Through 2055
The Dallas Fed economists also modeled what continued premium growth could mean over the next three decades. Using a premium-increase estimate from the climate-risk research firm First Street Foundation, which projects national homeowners insurance premiums will rise an average of 29.4 percent by 2055, the Dallas Fed researchers estimate that continued premium growth could push an additional 203,000 mortgages per year into delinquency between 2025 and 2055. The effect shows up across both government-backed and private mortgages, meaning the added strain is not confined to any single corner of the housing finance system.
Lower Credit Scores Carry the Larger Share of the Burden
The research also finds the response to rising premiums splits sharply by financial standing. Households with lower credit scores are far more likely to fall into delinquency after a premium increase, while financially secure households are more likely to respond by switching insurers or relocating instead. Over time, the Dallas Fed economists write, that dynamic risks concentrating lower-income households in higher climate-risk communities while more affluent households move toward safer, cheaper-to-insure ground, a pattern of geographic sorting layered on top of the immediate budget squeeze. The Bank frames the trend as a financial-stability question as much as a household one, since rising delinquencies eventually show up as losses for lenders and for the government-backed entities that guarantee mortgages.
This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.
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