6 of Every 7 People With Mortgages Have an Interest Rate Below 6%, But the Lock-In Effect Is Starting to Ease

• The mortgage rate lock-in effect is prompting many homeowners to stay put, contributing to America’s housing shortage.

• But the lock-in effect is slowly easing because eventually, people have to move; 86% of homeowners with mortgages have interest rates below 6%, down from 91% in 2023 and a record 93% in 2022.

Nationwide, 85.7% of U.S. homeowners with mortgages have an interest rate below 6%, down from 90.6% at the start of last year and a record high of 92.8% in mid-2022.  

That means even more than 85.7% of homeowners with mortgages have a rate below the current weekly average of 6.46%, prompting many to stay put instead of selling and buying another home at a higher rate—a phenomenon called the “lock-in effect.”

This is according to a Redfin analysis of data from the Federal Housing Finance Agency’s National Mortgage Database as of the first quarter of 2024, the most recent period for which data is available. 

Here’s the full breakdown of where today’s homeowners fall on the mortgage-rate spectrum:

• Below 6%: 85.7% of mortgaged U.S. homeowners have a rate below 6%, down from a record 92.8% in the second quarter of 2022.
• Below 5%: 76.1% have a rate below 5%, down from a record 85.6% in the first quarter of 2022. 
• Below 4%: 57.4% have a rate below 4%, down from a record 65.3% in the first quarter of 2022. 
• Below 3%: 22% have a rate below 3%, down from a record 24.7% in the first quarter of 2022.

“I have a dozen or so homeowners who would like to sell, but aren’t willing to give up their 3% interest rate for one that’s more than twice as high,” said Blakely Minton, a Redfin Premier real estate agent in Philadelphia. “Many of those sellers will list if rates get back down to 5%.”

The lock-in effect is fueling a shortage of homes for sale; new listings were at the lowest level in a year last month. But for most people, it’s not realistic to stay put forever, which is why the share of homeowners with rates below 6% is inching down. 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 job change or divorce has given them no other choice.

Another reason the share of locked-in homeowners has dipped: Everyone who purchased a home in the last year was entering the market at a time when the average mortgage rate was above 6%.

It’s worth noting that for some homeowners, the pandemic surge in home values means they have enough equity to justify selling and taking on a higher rate—especially if they’re downsizing or moving somewhere more affordable. It’s also worth noting that while many homeowners remain locked into their low mortgage rates, a rising share of Americans are mortgage-free.

Mortgage rates have declined in recent weeks, causing homebuyer mortgage payments to fall for the first time since 2020. The current average weekly mortgage rate (6.46%) is the lowest in 15 months, but still significantly higher than the 2.65% record low hit during the pandemic. 

With inflation on the decline, the Federal Reserve is now expected to start cutting interest rates at its next policy meeting on September 18. But the size and pace will depend on incoming economic data, particularly labor market data. Markets have now priced in aggressive expectations for how quickly the Fed will cut. If the Fed ends up cutting slower than markets anticipate, mortgage rates may rise a bit.

Methodology

This report is based on a Redfin analysis of data from the FHFA’s National Mortgage Database, which is a nationally representative 5% sample of all first-lien, closed-end purchased or refinanced residential mortgages in the U.S. The first quarter of 2024 is the most recent period for which data on outstanding mortgages is available. We assume each loan represents a homeowner with a mortgage, though some homeowners may have multiple loans.

While the prevailing mortgage rate for homebuyers often changes quickly, rates for existing homeowners don’t typically change significantly from quarter to quarter, as most buyers take out 30-year mortgages. Roughly 60% of U.S. homeowners have an outstanding mortgage.