Escrow Shock: How Rising Property Taxes And Insurance Are Squeezing Homeowners

As housing affordability continues to dominate national headlines, another crisis is quietly intensifying in the background: the rising cost of property taxes and homeowners’ insurance. While these expenses have always been part of the equation, their recent acceleration is creating new challenges for borrowers—and significant headaches for mortgage servicers.

For homeowners, the result is often a jarring spike in their monthly mortgage payments. For servicers, it’s a surge in escrow-related inquiries, misunderstandings, and customer frustration. These trends, illuminated in LERETA’s 2025 Escrow Insights Survey, point to a systemic pressure point that demands immediate attention from the mortgage industry.

A Growing Financial Burden for Borrowers

Property tax assessments and homeowners’ insurance premiums have both trended sharply upward in the past two years, often outpacing wage growth and inflation. According to LERETA’s survey, 68% of homeowners said their monthly mortgage payment increased due to these rising costs. Half of all respondents said a 10% increase in their payment would be financially challenging, while almost half reported that a 25% jump would cause real hardship.

Perhaps most telling is that nearly half of borrowers (49%) would consider relocating if property taxes continue to climb, and 27% would consider relocating due to higher insurance premiums. These are not discretionary expenses—taxes and insurance are non-negotiables tied directly to homeownership. When they increase, so does the escrow portion of the mortgage payment, even on a fixed-rate loan.

Yet, 45% of borrowers still mistakenly believe their mortgage payment can’t change with a fixed rate, underscoring a major disconnect between borrower expectations and the reality of escrow management.

The Hidden Cost for Servicers

This disconnect doesn’t just impact borrowers—it’s creating operational strain for mortgage servicers as well. In the past year, about 60% of the call volume in LERETA’s outsourced call centers was tied to questions about escrow increases, shortages and surprise payment changes.

Servicers, who have no control over local tax assessments or insurance markets, often bear the brunt of borrower frustration. This creates a difficult situation where even high-performing servicers can lose trust and satisfaction scores due to events outside of their control.

It’s a hard message to deliver to a borrower who thinks they have a fixed-rate mortgage, and now their payment is $200 more a month because of taxes and insurance. They’re not expecting it, and they don’t know who to blame—but it usually lands on the servicer.

Why This Moment Requires a Rethink

The implications are broader than call center congestion. With affordability already stretched, especially for first-time buyers and homeowners on fixed incomes, rising escrow payments can lead to increased delinquencies or even forced moves. And if nearly half of homeowners would consider selling due to tax hikes, this pressure could eventually ripple into inventory shifts and broader housing market instability.

It’s not just about payment increases—it’s about predictability, education, and borrower experience. The lack of awareness around how escrow works is exposing a gap in how servicers communicate with their customers.

What Servicers Can—and Should—Do Now

To navigate this pressure point, many of our servicer clients have adjusted their approach to escrow education and borrower outreach. That means:

• Proactive Communication: Using plain language to explain escrow changes, ideally before the annual review hits.
• Data-Driven Insights: Identifying regions where tax or insurance rates are likely to spike and alerting borrowers early.
• Digital Self-Service Tools: Giving borrowers easy access to escrow breakdowns, payment forecasts, and FAQs within their servicing portal and mobile apps.

The Path Forward

Rising property taxes and homeowners’ insurance are not short-term blips—they are structural realities in today’s housing economy. Mortgage servicers sit at the intersection of these costs and the borrower experience. As that pressure intensifies, the ability to explain, prepare, and support homeowners through escrow changes will become a critical differentiator in borrower satisfaction and portfolio performance.

The takeaway is clear: Escrow isn’t just an accounting function anymore—it’s a frontline issue of trust. Servicers who treat it that way will be better equipped to protect both their customers and their bottom lines.