The Mortgage Lock-In Effect Is Finally Fading. Here's Why That Matters.
For the past three years, the housing market has been stuck in a standoff. Millions of homeowners locked into ultra-low pandemic-era mortgage rates refused to sell, because moving meant trading a 2.8% rate for something north of 7%. Economists call this the "lock-in effect," and it has been one of the biggest forces keeping inventory low and prices stubbornly high.
But that grip is loosening. And if you are thinking about buying or selling, this shift could change everything.
What Changed?
Two things are happening at once.
First, mortgage rates have dropped meaningfully. With the 30-year fixed now hovering near 6%, the gap between a homeowner's current rate and what they would get on a new loan has narrowed significantly. Giving up a 3% rate for a 7.2% rate felt impossible. Giving up a 3% rate for a 6% rate still stings, but for many families it is now manageable, especially when life circumstances demand a change.
Second, time is doing its work. More recent buyers already hold rates in the 6% to 7% range, so moving does not come with a rate penalty at all. And for longer-term owners, the equity they have built over the past several years gives them a financial cushion that makes the transition easier. According to Redfin's analysis of federal mortgage data, the share of homeowners with rates at or above 6% climbed to 19.7% by mid-2025, nearly matching the 20.4% who still hold sub-3% pandemic-era rates. That gap is closing fast, which means the pool of "locked-in" homeowners is shrinking every quarter.
Why Life Eventually Wins
Even with a great mortgage rate, life does not stand still. People get new jobs in different cities. Families grow and need more space. Couples divorce. Parents age and need to move closer to their children. Retirees downsize.
For the past few years, many of these homeowners gritted their teeth and stayed put. But you can only delay life decisions for so long. Surveys now show that a growing number of homeowners plan to list their homes in 2026, citing personal circumstances as the primary motivator rather than market timing.
What This Means for Buyers
More sellers entering the market means more homes to choose from. After years of historically tight inventory, active listings have climbed back toward pre-pandemic levels in many markets. That translates to less competition, fewer bidding wars, and more room to negotiate on price, repairs, and closing costs.
If you tried to buy in 2022 or 2023 and walked away frustrated, the landscape today looks very different.
What This Means for Sellers
If you have been holding off on selling because of your low rate, it is worth revisiting the math. The rate gap is smaller than it was a year ago, and your home has likely appreciated significantly since you bought it. In many cases, the equity you have gained more than offsets the higher monthly payment on a new mortgage.
The key is running the numbers with a real scenario, not just guessing.
Thinking about making a move but unsure whether the math works in your favor? Let's sit down and look at your specific situation. You might be surprised at what is possible today.