Housing News

The Mortgage Lock-In Effect Is Fading: Will More Affordable Homes Will Go Up for Sale?

Fewer homeowners with mortgages are “locked” into their homes due to super-low interest rates.

The percentage of homeowners with mortgage rates at 6% or above is now higher than those with rates under 3%, according to a Realtor.com analysis.

Many homebuyers and homeowners locked in record-low rates during the pandemic, when rates dipped into the 2% range. That’s impeded the housing market since then as those with lower rates have been reluctant to sell their homes and give up those rates to buy new homes with higher rates.

“This crossover reflects a gradual resetting as some households trade in low-rate mortgages for higher-rate loans or enter the market for the first time,” said Realtor.com Chief Economist Danielle Hale in a statement. “[However, the] rate lock-in continues to limit the pace of [housing] inventory recovery.”

About 21.2% of homeowners with a mortgage had interest rates that were 6% or more in the third quarter of 2025, according to the report. Meanwhile, 20% had rates under 3%.

However, just over half, 51.5%, of homeowners with mortgages had rates at or below 4%. More than two-thirds, 69%, had rates of 5% or less. And roughly 80% had rates below 6% during the third quarter of last year.

That is keeping many homeowners from moving. The typical homeowner would see their monthly housing payment shoot up by nearly $1,000 if they sold their home to buy a new, median-priced property with a new loan.

It’s also limiting the supply of homes for sale, especially for cost-conscious first-time buyers. Homeowners who could have traded up from more affordable starter homes into pricier, larger homes are staying put instead. That lack of homes coming onto the market is keeping prices high as buyers compete over them.

Additionally, mortgage interest rates have been north of 6% since September 2022. However, they did fall to 6.06% in the week ending Jan. 15, according to Freddie Mac. That’s the lowest they have been in more than three years.

Rates have moved dramatically over the last few years, partly due to monetary policy. The U.S. Federal Reserve lowered its benchmark interest rate to near 0% during the pandemic to give the economy a boost. But when inflation soared, it began to increase its rates back up again in March 2022.

While mortgage rates are separate from the Fed’s short-term interest rate, they generally move in the same direction.

“Mortgage rate decreases into the low-6% range could encourage additional homebuying activity,” said Hale in a statement. “Further easing in inflation and mortgage rates would be key to unlocking more seller participation, helping to relieve price pressure and competition.”

Put another way, if interest rates continue to fall (or even stay around where they are now), more people may feel more comfortable putting their home on the market. That would translate directly into there being more homes for sale.

More homes hitting the market could help ease home prices, thereby making it more affordable for both first-time and repeat homebuyers to buy a home.