The surge in residential real estate has left many people with far more assets compared with banks. Often the properties are well paid down from original low-interest mortgage balances. Some entities like TPG Angelo Gordon hunger for the possibilities.

“Traditionally you would refinance your first [mortgage] and take some cash out,” said TJ Durkin, head of structured credit and financing at TPG Angelo Gordon, in an interview on Bloomberg’s Credit Edge podcast. But he said the “math doesn't make any sense today” because of the difference between the original mortgage rates millions of homeowners have been under and the current relatively inflated rates.

Since early 2011, consumer residential mortgage rates were generally under 5% and as low as 2.66% in January 2021. After the Federal Reserve started increasing the benchmark federal funds rate in the second quarter of 2022, the 10-year Treasury yield also started climbing in anticipation of higher interest rates and the possibility of sustained inflation. With the 10-year yield, the average 30-year fixed-rate mortgage grew to as high as 7.79%, and that most recently hovered around 6.8%.