Understanding the Mortgage Rate Lock-In Effect

Understanding the Mortgage Rate Lock-In Effect

  • Faber Real Estate Team
  • 05/23/24

Understanding the Mortgage Rate Lock-In Effect

In recent years, mortgage rates have significantly risen from their historically low levels, creating a notable impact on the housing market. As a result, home sales in the U.S. have dropped from an annual pace of 6 million in 2021 to under 4 million by the end of 2023. The current 30-year fixed mortgage rate hovers around 7%, making home purchases less affordable compared to the rates locked in below 5% by most homeowners. This situation is known as the "mortgage rate lock-in" effect (Simonsen, 2024).

Homeowners with mortgage rates around 3% possess a valuable financial asset, deterring them from selling their homes. Even during economic downturns, these low rates make it more advantageous for homeowners to retain their properties, unlike in previous cycles where high mortgage rates often led to home sales. This lock-in effect means that even if a homeowner faces job loss, they are more likely to fight to keep their home and mortgage (Simonsen, 2024).

Key Insights on Mortgage Rate Lock-In

The lock-in effect has roots deeper than the recent rise in mortgage rates. Historically, lower mortgage rates have led to a significant reduction in home sales as homeowners choose to hold on to their properties to benefit from cheap financing. This trend has been evident since 2014 when mortgage rates began to fall, causing a consistent decline in new listings and available inventory (Simonsen, 2024).

Impact on Inventory and Prices

The relationship between mortgage rates and housing inventory is direct and significant. Higher mortgage rates lead to an increase in available inventory, as the financial incentive to hold on to properties diminishes. For instance, in 2024, there has been a 30% increase in available homes compared to the same period in 2023, highlighting a growing inventory due to persistently high rates (Simonsen, 2024).

Conversely, a return to low mortgage rates would likely decrease inventory and drive home prices higher. The data suggest that low rates encourage homeowners to retain their properties, exacerbating the lock-in effect and limiting the supply of homes for sale. This dynamic was observed throughout the 2010s, where falling rates coincided with a decline in new listings and a subsequent increase in home prices (Simonsen, 2024).

Policy Implications and Future Outlook

Addressing the mortgage rate lock-in effect requires a nuanced approach. While lower rates may temporarily boost affordability and home sales, they can also perpetuate the inventory shortage and drive prices higher in the long term. On the other hand, maintaining higher mortgage rates over an extended period could help alleviate the lock-in effect by encouraging more homeowners to sell, thereby increasing inventory and moderating home prices (Simonsen, 2024).

One potential policy solution is the implementation of assumable mortgages, where homebuyers can take over the seller's existing mortgage rate. This approach could provide immediate relief for buyers facing affordability challenges. However, it may also prolong the lock-in effect, as it allows homeowners to transfer their low rates to new buyers, perpetuating the market conditions created by the lock-in phenomenon (Simonsen, 2024).


The mortgage rate lock-in effect is a complex issue with significant implications for the U.S. housing market. Understanding its root causes and potential solutions is crucial for policymakers, real estate professionals, and homeowners. As the market continues to evolve, it will be essential to balance short-term affordability with long-term stability to create a healthy and sustainable housing market (Simonsen, 2024).


Navigate the Mortgage Rate Lock-In Effect with Us

Are you feeling locked in by your current mortgage rate? The Faber Real Estate Team is here to help you navigate the complexities of the mortgage rate lock-in effect. Whether you’re looking to buy or sell, our expertise and commitment ensure that you make the best decisions in today's evolving market.

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  • Expert Guidance: Our team provides unparalleled market insights and personalized advice.
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Don’t let mortgage rates hold you back. Contact the Faber Real Estate Team today and let us be The Key to Your Dreams®.



Simonsen, M. (2024). What everyone needs to know about mortgage rate lock-in. HousingWire. Retrieved from https://www.housingwire.com/white-paper/housingwire-research-the-mortgage-rate-lock-in-effect-is-shaping-todays-market/?utm_medium=email&_hsenc=p2ANqtz-_03D7H-cAVo5WmNxqHT72mBBi2-Al0tPEk5MFzz9A8hbGFw9CmswSWog5Wi-gpaFRu95HXDdyN1TKYyEdg6T4hurPpHA&_hsmi=306384706&utm_content=306384706&utm_source=hs_email



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