Mortgage Lock‑In: Why Homeowners Aren’t Moving—and How It’s Freezing Supply

Mortgage rate lock‑in isn’t just a headline—it’s quantifiable and it’s reshaping U.S. housing. Federal Reserve researchers link the 2021–22 mobility decline directly to the widening gap between today’s mortgage rates and the ultra‑low loans many owners hold. Their working paper estimates mortgage rate lock‑in explains 44% of the drop in borrower mobility in that period. [federalreserve.gov]

FHFA’s staff working paper puts equally large numbers on the supply side: lock‑in reduced fixed‑rate home sales by an estimated 57% in 2023 Q4 and prevented roughly 1.33 million sales between 2022 Q2 and 2023 Q4. That supply squeeze lifted prices by about 5.7%, more than offsetting the direct downward pressure higher rates typically exert. [fhfa.gov]

The latest market pulse • Rates: The 30‑year fixed averaged 6.24% in the week of November 13, 2025. That’s down from peaks in 2023 but still far above most owners’ existing loans. [globenewswire.com] • Sales and supply: September existing‑home sales ran at a 4.06 million seasonally adjusted annual rate, with total inventory at 1.55 million units—about 4.6 months’ supply. Conditions have improved from last year’s trough but remain below pre‑pandemic norms. [nar.realtor] • Demand flow: Mortgage applications ticked higher in early November, with purchase apps up 6% week‑over‑week. That’s a positive sign, though applications precede closings by several weeks. [mba.org]

Who’s locked in—and for how long? One reason listings remain scarce: the vast majority of homeowners still carry comparatively cheap mortgages. As of Q2 2025, Redfin’s analysis of FHFA data shows 80.3% of mortgaged owners have rates below 6%, and 52.5% are below 4%. Only 19.7% are at 6% or higher. [redfin.com]

Lock‑in changes behavior most for nearby, “churn” moves—trading up, downsizing, or switching neighborhoods—more than it does for long‑distance moves. The Fed paper finds the biggest hit to local mobility, with modest effects on moves across labor markets. [federalreserve.gov]

Surveys echo the slowdown: New York Fed researchers report few homeowners plan to move in the next three years, with mean move probabilities clustered around the high‑teens. When respondents are hypothetically allowed to keep their current rate after moving, their average probability of moving rises by about 7.4 percentage points—underscoring how financing costs anchor mobility. [libertystreeteconomics.newyorkfed.org]

Meanwhile, owners tapping equity are favoring HELOCs over cash‑out refinances to preserve low first‑mortgage rates. By late 2023, nearly 70% of outstanding mortgages carried rates at least three percentage points below prevailing market rates—a powerful incentive to avoid refinancing the first lien. HELOC balances have climbed roughly 20% since their 2021 trough. [libertystreeteconomics.newyorkfed.org]

Will lower rates unlock the market? A gradual decline in rates should help, but the research suggests the response can be non‑linear and depends on how tight conditions were to start. In a very tight market, lock‑in reduces churn and can even push prices up by shrinking effective supply; in a more balanced market, the same shock would have had smaller effects. [federalreserve.gov] Recent data show more owners with higher‑than‑pandemic rates, which may slowly ease lock‑in, but most homeowners still sit well below current mortgage quotes. [redfin.com]

Near term, expect: • Modest improvement in new listings as life events force moves, not a flood. • Regional variation: markets with bigger gaps between owners’ rates and new‑loan rates likely stay tighter for longer. • A quicker pickup in applications and pendings than in closed sales as financing and appraisal timelines lag. [mba.org][nar.realtor]

Playbook for buyers and sellers • Use financing tools that bridge the rate gap: temporary or permanent buydowns, builder incentives, and—in the right cases—assumable loans (commonly for certain government‑backed mortgages). These can lower the effective payment without waiting for a large rate drop. • If you’re selling, price to the comps and highlight payment‑lowering features (credits for buydowns, paid rate‑locks). Homes that are staged well and priced correctly still move quickly where months’ supply is tight. [nar.realtor] • If you’re staying put, but need liquidity, discuss HELOC options with a lender rather than a cash‑out refi that would reset your low first‑mortgage rate. [libertystreeteconomics.newyorkfed.org]

Bottom line Mortgage lock‑in remains a central driver of slow transaction volumes and lean inventory. The average 30‑year fixed near the mid‑6s is helping at the margin, and applications have perked up. But with most owners below today’s rates, the path back to a fully fluid resale market is likely to be gradual. Watching rates, months’ supply, and the share of owners with sub‑4% loans will tell you how fast the freeze thaws. [globenewswire.com][nar.realtor][redfin.com]