What Neighbors Bank's analysis shows
Headed into 2026, Neighbors Bank says escrow items are taking up a larger chunk of monthly mortgage bills than they have historically. Across 450 major metros, the share attributed to taxes and insurance is 21%, reinforcing the point that "a growing share of homeowners' monthly payments isn't going toward principal or interest at all." The report also cautions, "When people think about buying a home, the focus is on price, downpayments and the interest rate," before adding, "But a growing share of today's housing payment isn't going toward building equity at all."
To generate its estimates, the bank pulled insurance data from the U.S. Department of the Treasury dated 2022, then adjusted those figures with the Labor Department's producer price index for 2025. It also derived median effective property tax rates by comparing median home values with median real estate taxes paid, using 2024 Census Bureau data.
Escrow is the part of a mortgage payment nobody shops for, and it keeps climbing anyway. Market Briefs breaks down housing costs free every morning.
Who feels the squeeze and where
First-time buyers and households putting little money down face bigger hits from rising escrow charges, as lenders often collect their taxes and insurance each month in escrow rather than having them pay the bills once per year. The report flags that "Lower home prices and downpayment requirements can make these markets accessible upfront," "even as ongoing taxes and insurance place added pressure on monthly budgets."
Illinois stands out. In Decatur, taxes and insurance were more than 37% of the typical monthly mortgage bill, even with an average payment of just $955. In Peoria, they were more than 35% of a $1,281 average payment, and in Rockford they were nearly 34% of a $1,585 average payment. The bank adds that in markets such as Illinois, property taxes play the bigger role, as the Prairie State depends on them for roughly 40% of local government revenue versus 30% for the nation overall.
Florida shows a different pattern. In Pensacola and Miami, escrow costs were 43% and 34% of average monthly payments, with surging insurance premiums doing most of the lifting.
What homeowners are missing and why it matters for your money
Many borrowers with fixed-rate loans do not realize their monthly payment can still change when tax assessments or insurance bills go up. Lereta surveyed more than 1,000 homeowners and found almost 40% believed a fixed mortgage rate and an escrow account meant the amount due each month could not move, up from 36% the year before. The firm also said escrow-related costs climbed 30% on average last year and are about 45% higher than five years ago. Across 35 states, these charges make up at least 30% of a typical monthly mortgage payment, and in nine states they reach 40% or higher.
Neighbors Bank says these creeping, flexible costs are making long-run affordability shakier and complicating how lenders assess who qualifies. For reference, the Mortgage Bankers Association says that in January, $2,070 was the median monthly payment nationwide on newly originated mortgages. The takeaway for your budget: even if your rate is locked, the portion of your check that goes to taxes and insurance can grow, so what feels affordable at closing can evolve over time.
Taxes and insurance now move your payment more than rate shopping ever will. Get the free Market Briefs daily newsletter and stay ahead of the next increase.
