Written by: Internal Analysis & Opinion Writers
Mortgage rates, which began 2025 near 7%, have gradually slid into the 6.25%–6.50% range—a shift that’s slowly loosening the so-called “lock‑in” effect that has kept many homeowners in place. As rates fall, more borrowers with mortgages above 6% are reconsidering whether now is the time to refinance or make a move.
At the start of 2025, only about 9.5% of outstanding first‑lien mortgages had interest rates over 6%. By the end of the first quarter, that number had nearly doubled to 18.9%, and by the second quarter, it ticked up further to 19.7%—the highest share seen since 2015. This indicates that more homeowners now hold loans with rates comparable to or even higher than what’s currently offered, weakening the inertia that kept them on the sidelines.
Redfin economist Chen Zhao noted, “More homeowners are deciding it’s worth moving even if it means giving up a lower mortgage rate. Life doesn’t stand still—people change jobs, expand families, downsize, or just want a fresh location.” The growing number of households choosing to sell or refinance despite modest rate differences signals an important psychological shift.
Meanwhile, the share of mortgage borrowers holding ultra-low rates continues to decline. In the second quarter of 2025, just over 20% of active mortgage holders had rates below 3%, a notable drop from the 24.6% seen in the first quarter of 2021. The gradual erosion of these legacy rates is critical to breaking the stalemate that’s limited housing turnover.
That said, the lock‑in effect still exerts considerable influence. Nearly 80% of borrowers are sitting on mortgage rates below 6%, making the financial trade-off of moving or refinancing less appealing. Until a more significant gap is closed—or until life events override financial hesitation—many of these homeowners are expected to stay put.
Forecasts suggest the recovery will be steady rather than sudden. Fannie Mae expects 30-year mortgage rates to decline to 5.9% by the end of 2026, supporting the idea that improvement will unfold gradually. This pace gives buyers time to plan but may limit sudden surges in transaction volume.
Certain markets could unfreeze more quickly than others. Metro areas with high concentrations of mortgaged homeowners—such as Washington, D.C., Denver, and Virginia Beach—are more sensitive to shifts in interest rates. By contrast, markets with older populations or higher shares of outright homeowners may see slower movement.
Recent data shows purchase activity beginning to stir. Pending home sales rose 4% month-over-month in August and 3.8% year-over-year, offering early evidence that a modest rate dip can have a measurable impact on buyer behavior. Though still well below pandemic-era highs, the trend suggests momentum is building.
In summary, while ultra-low pandemic-era mortgage rates continue to weigh on market fluidity, the share of borrowers with above-market rates is finally rising. This signals the early stages of recovery in housing mobility, even as broader affordability and inventory challenges remain. The path forward may not be swift, but it is beginning to clear.
