Mortgage rate lock-in can keep homes off the market and support prices when housing supply is already tight, but it is not a one-way price force. Owners with unusually cheap fixed-rate loans may postpone selling because replacing that loan would mean borrowing at a much higher rate. That reduces some listings and moves. At the same time, higher rates reduce what buyers can afford, which weakens demand. The price outcome depends on which force is stronger and on how balanced the market was before the rate shock.
The clearest way to analyze lock-in is to separate four things: the owner’s financing penalty for moving, the resulting change in listings and transactions, the buyer-demand effect of higher rates, and the market’s starting tightness. Estimates from the Federal Reserve Board, the Federal Housing Finance Agency (FHFA), the Federal Reserve Bank of New York, and NBER papers measure different outcomes and should not be treated as interchangeable.
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What mortgage rate lock-in means
A homeowner is economically “locked in” when keeping an existing mortgage is valuable enough to make moving unattractive. Most U.S. mortgages are fixed-rate loans, and most are not portable or assumable except in limited situations. When the owner sells, the old loan is generally paid off; buying another home usually requires a new mortgage at the rate available then.
The relevant comparison is therefore not simply the home’s current value. It is the cost of retaining the existing loan versus the payment on replacement financing for the next home. The larger the gap between those rates, the larger the financial penalty for moving.
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A dated payment illustration
Freddie Mac’s 2023 analysis illustrates the wedge with a borrower who has a $236,379 balance at 2.65%. The principal-and-interest payment on that loan was $1,007 per month. A new 30-year loan for the same balance at 6.81% would require more than $1,500 per month. Those rates and payments are historical examples, not current market quotes or a forecast for a typical household. They show why a family may stay in its current home even when it would otherwise prefer to move.
Why the penalty affects more than the seller
Moving normally creates two transactions: one household supplies an existing home for sale and then becomes a buyer elsewhere. A locked-in household may do neither. It can keep its current home off the resale market and also forgo buying a different home. That is why lock-in can reduce both housing supply and some forms of housing demand.
How lock-in changes housing inventory
When owners delay selling, fewer existing homes reach the for-sale market. The immediate effect is a reduction in new listings and completed transactions, not necessarily a permanent loss of housing units. A home that is withheld today may be listed later if rates fall, the owner’s circumstances change, or the financial benefit of moving becomes less important.
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- New listings: homes newly offered for sale during a period. Lock-in can reduce this flow directly.
- Transactions: completed sales. A prevented sale is a transaction that did not occur; it is not automatically one fewer active listing at every moment.
- Active inventory: homes currently available for purchase. This depends on new listings, contract speed, withdrawals and how long properties remain unsold.
- Months of supply: an inventory-to-sales measure. It can rise or fall because of changes in either inventory or the pace of sales.
FHFA’s 2024 estimate of 1.33 million prevented sales from the second quarter of 2022 through the fourth quarter of 2023 is a transaction-flow estimate. It should not be relabeled as 1.33 million homes missing from active listings or as a specific number of months of supply.
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The estimated sale-probability relationship
In the FHFA paper, each one-percentage-point increase in the market mortgage rate above a borrower’s origination rate was associated with an estimated 18.1% lower probability of sale. This is an estimated relationship across the study’s data and period, not a rule that applies identically to every owner, loan or local market.
Does mortgage rate lock-in keep home prices high?
It can, especially when the market begins with very little inventory. Fewer listings mean buyers compete for a smaller number of homes. If demand remains strong enough, sellers can receive more offers, homes can spend less time on the market, and prices can be higher than they would have been without the supply reduction.
But higher mortgage rates also reduce buyers’ purchasing power. For a given income and down payment, a larger interest bill supports a smaller loan. Some buyers delay purchasing, choose less expensive homes or leave the market. That demand-side effect pushes prices in the opposite direction.
What the Federal Reserve Board estimated for the 2022 shock
A Federal Reserve Board paper revised in May 2025 estimated that the 2022 lock-in shock reduced time on market by 29% and increased house prices by 8%. Those estimates describe historically tight initial market conditions. The same paper’s counterfactual exercise found little to no effect on prices or market tightness when the shock was applied to a more balanced 2019 market.
The qualification is central: lock-in is more likely to amplify price pressure when buyers are already chasing scarce listings. In a market with ample homes for sale or weak demand, preventing some sellers from listing may not produce the same price increase.
FHFA’s supply and demand components
FHFA estimated that the reduction in supply associated with lock-in raised prices by 5.7% over its study period, while the direct effect of elevated mortgage rates on demand lowered prices by 3.3%. These are modeled components of the same analysis, covering the 2022 second quarter through the 2023 fourth quarter. They are not a current national forecast and should not be read as a universal net effect for every market.
Why estimates differ
Published figures answer different questions. Before comparing them, identify the outcome, period, method and market baseline.
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| Source and estimate | Outcome | How to interpret it |
|---|---|---|
| Federal Reserve Board, revised May 2025: 44% of the 2021–2022 decline in mortgage-borrower mobility | Observed change in mobility | The authors account for selective-refinancing bias and find the effect was concentrated in local moves, with modest effects across labor-market areas. |
| Federal Reserve Board, revised May 2025: 29% lower time on market and 8% higher prices | Market tightness and prices | Estimated for the 2022 shock in historically tight conditions; little to no price or tightness effect appeared in the paper’s balanced-2019 counterfactual. |
| FHFA, 2024: 18.1% lower sale probability per one-point rate gap | Probability of sale | An estimated relationship, not a fixed household-level response. |
| FHFA, 2024: 1.33 million prevented sales | Transaction flow | Covers 2022 Q2–2023 Q4 and is not a count of active listings. |
| FHFA, 2024: 5.7% supply-related price increase and 3.3% direct rate-related price decrease | Modeled price components | The two effects operate in opposite directions and must be kept separate. |
| Federal Reserve Bank of New York, 2024: 7.4 percentage-point increase in stated three-year moving probability | Survey intention | A hypothetical response to an option to keep the existing rate, concentrated among respondents with lower current rates; respondents above 4% did not show a statistically significant increase. |
| NBER Working Paper 32781, 2024: 16% lower mobility and $20 billion deadweight loss | Mobility and welfare | A separate paper’s estimate for households with mortgages in 2022 and 2023; it is not the same statistic as the Federal Reserve Board’s 44% share of a year-over-year decline. |
| NBER Working Paper 35237, 2026: 4.4% higher aggregate prices, 1.5% higher rents and 25% lower mortgage-borrower mobility | Model counterfactual | A spatial housing-ladder model’s estimate relative to a no-lock-in scenario, not an observed national price change or a forecast. |
These numbers cannot be averaged into one “lock-in effect.” A sale probability, a survey intention, a prevented transaction, a market price difference and a model-based mobility estimate have different definitions and evidence bases.
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Why homeowners are staying put
Payment shock
The most direct reason is the replacement payment. An owner who refinanced or purchased at a very low rate may face a much larger payment after selling, even if the new home costs no more than the old one. Taxes, insurance, moving costs and a down payment can add to the hurdle.
Limited substitutes for a low-rate loan
Because most mortgages cannot simply be transferred to a new property, the owner generally cannot carry the old interest rate to the next home. Assumable loans exist, but they cover only limited cases and do not provide a broad solution for conventional borrowers.
Household decisions are not purely financial
Some owners will move despite the rate gap because of a new job, divorce, health needs, family changes or a desire to downsize. Lock-in changes the threshold at which a move is worthwhile; it does not eliminate every reason to sell.
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A household that remains in a larger home may prevent a chain of moves. A downsizer who would have sold a four-bedroom house might otherwise buy a smaller property, freeing the larger home for a family and adding demand to the smaller-home segment. If that downsizer stays put, the market loses both the listing and the purchase that would have followed.
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The 2026 NBER paper models this housing-ladder mechanism and estimates 25% lower mortgage-borrower mobility, 4.4% higher aggregate house prices and 1.5% higher rents relative to a no-lock-in counterfactual. These are model results, not directly observed national changes. They are useful for showing how one delayed move can affect several parts of the housing market, including renters who might otherwise have occupied homes vacated by movers.
Will lower mortgage rates bring more homes onto the market?
Lower rates can reduce lock-in by narrowing the gap between an owner’s existing loan and replacement financing. That makes selling and buying again less costly. The response is unlikely to be instantaneous or uniform.
What would make listings respond
- A smaller rate gap: Owners near their personal move threshold may decide that the new payment is manageable.
- More buyer capacity: Lower rates increase purchasing power, helping a seller feel confident that a replacement home can be financed.
- Accumulated life events: Households that postponed a move may list when job, family or health needs become urgent.
- Local conditions: Owners in areas with strong employment and limited construction may respond differently from owners in markets with abundant supply.
Lower rates can therefore release some deferred supply while also strengthening demand. If many owners list at once, inventory may improve; if buyers return even faster, prices may not fall. The direction of the price change still depends on the balance between newly supplied homes and newly activated buyers.
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What lock-in means for buyers, sellers and analysts
For buyers
Expect fewer comparable homes in neighborhoods where owners have large rate advantages. A limited selection can increase the value of preparation: know the payment you can sustain, distinguish a scarce listing from an overpriced one, and avoid assuming that a future rate decline is guaranteed. Higher rates can reduce competition from other buyers, but that benefit may be offset by fewer sellers.
For homeowners considering a move
Compare the complete cost of moving rather than focusing only on the mortgage rate. Include the replacement loan, taxes, insurance, maintenance, selling expenses, moving costs and the value of the home you would leave. A low-rate loan is valuable, but a required move may still be financially or personally justified.
For anyone reading a housing statistic
Ask what the number measures. “Fewer sales” is not the same as “fewer active listings,” and a modeled price difference is not the same as an observed price increase. Check the study period, geography, loan sample, market conditions and whether the figure is a survey response, an administrative-data estimate or a counterfactual model.
The practical bottom line
Mortgage rate lock-in is best understood as a financing wedge that suppresses some moves. It can reduce listings, transaction volume and mobility, and it can support prices when a market is already undersupplied. It does not guarantee higher prices because the same rate increase reduces buyer purchasing power. The Federal Reserve Board’s contrast between a tight 2022 setting and a balanced 2019 counterfactual captures the key condition: lock-in amplifies scarcity; it does not create the same price effect in every market.
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