{"id":77349,"date":"2024-01-12T05:00:48","date_gmt":"2024-01-12T13:00:48","guid":{"rendered":"https:\/\/www.redfin.com\/news\/?p=77349"},"modified":"2024-01-11T15:50:10","modified_gmt":"2024-01-11T23:50:10","slug":"mortgage-rate-lock-in-housing-2023","status":"publish","type":"post","link":"https:\/\/www.redfin.com\/news\/mortgage-rate-lock-in-housing-2023\/","title":{"rendered":"The Lock-in Effect: 89% of People With Mortgages Have an Interest Rate Below 6%, Down From a Record 93% in 2022"},"content":{"rendered":"

Most homeowners with mortgages have a rate below today\u2019s average, prompting many to stay put. But the share of homeowners with relatively low rates has fallen from its record high because some have given up on waiting to move until rates nosedive, and everyone who has purchased a home in the last year has done so when rates were above 6%.<\/strong> <\/span><\/i><\/p>\n

Nationwide, 88.5% of U.S. homeowners with mortgages have an interest rate below 6%, down from a record high of 92.8% in mid-2022.\u00a0\u00a0<\/span><\/p>\n

That means <\/span>more than <\/span><\/i>88.5% of homeowners with mortgages have a rate below the current weekly average of<\/span> 6.66%<\/span><\/a>, prompting many to stay put instead of selling and buying another home at a higher rate\u2014a phenomenon called the \u201clock-in effect.\u201d\u00a0<\/span><\/p>\n

But for most people, it\u2019s not realistic to stay put forever. The share of homeowners with a rate below 6% has fallen from its record high partly because some homeowners are opting to bite the bullet and give up their low rate in order to move. Many are selling because a major life event like a divorce has given them no other choice, while others are putting their homes on the market because they want to live in a different house or city.<\/span><\/p>\n

Another reason the share has dipped: Everyone who purchased a home in the last year\u2014repeat buyers and first-time buyers alike\u2014was entering the market at a time when the average mortgage rate was above 6%.<\/span><\/p>\n

\"\"<\/p>\n

This is according to a Redfin analysis of data from the Federal Housing Finance Agency\u2019s National Mortgage Database as of the third quarter of 2023, the most recent period for which data is available. <\/span>The share of homeowners with rates below 6% likely fell further in the fourth quarter because a dip in mortgage rates drove more people to buy and sell homes, even as rates remained above 6%.<\/span><\/p>\n

\u201cI\u2019m working with a lot of homeowners who are selling because of things like divorces, new jobs or deaths in the family,\u201d<\/span> said <\/span>David Palmer<\/span><\/a>, a <\/span>Redfin Premier<\/span><\/a> real estate agent in Seattle<\/a>.\u00a0<\/span><\/p>\n

\u201cI\u2019m also working with homeowners who are <\/span>bursting at the seams and selling because they\u2019ve outgrown their current home.\u201d<\/span><\/p>\n

It\u2019s worth noting that for some homeowners, the fact that home prices soared during the pandemic means they have enough equity to justify selling and taking on a higher rate\u2014especially if they\u2019re downsizing or moving somewhere more affordable.<\/span><\/p>\n

The Lock-In Effect Continues to Fuel America\u2019s Housing Shortage, But Listings Have Started to Tick Up<\/h3>\n

Americans continue to face a shortage of homes for sale, and a primary reason is the lock-in effect.\u00a0<\/span><\/p>\n

But home listings have been <\/span>ticking up<\/span><\/a> year over year, in part because some homeowners simply have to move, as discussed above. Listings are also rising because mortgage rates have fallen enough in recent weeks to convince some homeowners to let go of their low rate. Today\u2019s 6.66% average mortgage rate is down from a peak of roughly 8% in October.<\/span><\/p>\n

\u201cSellers have started coming out of the woodwork because that\u2019s typical for January and because mortgage rates have dropped,\u201d Palmer said. \u201cThey\u2019re also coming to terms with the fact that rates aren\u2019t going back down to 3% any time soon, which makes it easier to pull the trigger on selling. But a lot of sellers are worried about finding their next house because even though listings are rising, there\u2019s still a housing shortage. That\u2019s part of the reason so many sellers remain on the sidelines.\u201d<\/span><\/p>\n

Here\u2019s the full breakdown of where today\u2019s homeowners fall on the mortgage-rate spectrum:<\/b><\/p>\n