REAL ESTATE

Might the Mortgage Lock-in Effect Finally Be Fading?

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As mortgage rates shot from less than 3 percent in 2022 to more than 8 percent in 2023, hand-wringing commenced. All those homeowners who scored record-low mortgage rates would never move, the thinking went. Housing economists even coined a new term — “the mortgage lock-in effect.”

For a time, the lock-in effect was a major force in the housing market. As of mid-2022, fully 92.7 percent of Americans with mortgages boasted rates less than 6 percent, according to Redfin, the national real estate brokerage.

But in a reminder that nothing in the housing market lasts forever, the lock-in effect is fading. By 2023, the share of homeowners with sub-6 rates had dipped to 87.7 percent. And in Redfin’s most recent reading, from late 2024, just 82.8 percent of homeowners had mortgage rates below the 6 percent threshold.

What happened? Even though higher mortgage rates slowed home sales in 2023 and 2024, there still were millions of Americans who bought homes. And those buyers had no choice but to accept mortgage rates north of 6 percent — and, in some cases, above 7 percent.

“If this growth rate were to continue, which is feasible, the share of homeowners with a rate of at least 6 percent would nearly double in the next three years,” Redfin…