The ‘lock-in effect' is making it harder to buy a home—even if mortgage rates fall

CNBC

16-07-2025

Most homeowners say they won't buy or sell a home this year, no matter where mortgage rates go.
That's according to a new Bankrate survey, which shows 54% of U.S. homeowners wouldn't feel comfortable selling at any mortgage rate in 2025, up 12 percentage points from last year. A similar share of homeowners, 51%, say they wouldn't feel comfortable buying a new home, either.
The reluctance helps explain why home sales remain historically low, with spring volume tracking at levels last seen during the 2009 housing crash, according to seasonally adjusted data from the National Association of Realtors.
The survey results point to a well-entrenched "lock-in effect," where homeowners are unwilling to give up the historically low mortgage rates they secured during the pandemic and take on significantly higher ones today, says Jeff Ostrowski, real estate analyst at Bankrate.
"Americans who bought homes at pre-2021 prices and pre-2022 mortgage rates face sticker shock when they look at today's housing market," he tells CNBC Make It. "Home prices are at record highs and mortgage rates are also much higher. That combination is creating a reluctance to do anything."
Higher homeownership costs are also making it harder for buyers, especially first-time buyers who lack the built-up equity that current homeowners can use to afford today's high prices. First-time buyers made up just 24% of the market in 2024, the lowest share on record, according to NAR.
Mortgage rates have more than doubled compared with four years ago, with 30-year fixed-rate loans hovering near 6.5% so far in 2025, according to Freddie Mac data.
That has become a major barrier to getting more homes on the market. Only 3% of all homeowners say they would feel comfortable selling a home this year if mortgage rates are 6% or higher, according to the Bankrate survey.
Excluding those who wouldn't buy at any rate, 37% of homeowners say mortgage rates would need to fall below 5% for them to feel comfortable buying. Just 1% say they'd be comfortable buying at 6% or higher, according to Bankrate.
The hesitation is pronounced among those with the lowest existing mortgage rates. Forty-one percent of homeowners paying less than 3% say they wouldn't consider buying again at any rate, according to Bankrate. Staying put allows them to keep housing costs — typically the largest household expense — fixed at an unusually low level.
Refinancing isn't any more appealing. Just 1% of homeowners say they'd refinance at rates 6% or higher, while more than half say they wouldn't refinance under any conditions, according to Bankrate.
"Most American homeowners have mortgage rates below 4%, and some are below 3%," says Ostrowski. "Now that rates are flirting with 7%, few are eager to trade a 3% rate for a much higher one."