Economic Insights — There has never been such a huge gap between the rate homeowners pay on their current mortgage and the going rate for new mortgages. This has big implications for the housing market.
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Millions of American homeowners are experiencing something somewhat unprecedented: The prevailing rate for a new mortgage significantly exceeds the rate of their current mortgage. This means that, all else being equal, the monthly payment on a new mortgage would substantially exceed a homeowner's current monthly payment. This produces a financial disincentive to reset the terms of a loan by either moving or refinancing. Economists call this phenomenon "mortgage lock-in." This article explains why mortgage lock-in happens, explores how it affects the housing market, and discusses potential policies to counteract it.
This article appeared in the Third Quarter 2025 issue of Economic Insights. Download and read the full issue.
