The Lock-In Effect: Will It Ever Let Go of the Housing Market?

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The Lock-In Effect: Will It Ever Let Go of the Housing Market?

May 26, 2025

Since 2022, many homeowners have been reluctant to sell and move because they would have to finance their next homes at much higher rates than they pay on their current mortgages. According to a federal analysis, this widespread conundrum — known as the lock-in effect — has contributed to a nationwide housing shortage and a steep rise in home prices. Geographies with high home values, and affluent borrowers with larger mortgages, appear to be more sensitive to the lock-in effect.

In the second quarter of 2024, the average mortgage had a fixed rate that was 2.54 percentage points lower than the current market rate for similar loans. This was below the peak of 3.06 percentage points reached near the end of 2023 but still much greater than the 0.86 percentage-point difference in Q2 2022.

Here's a look at several market trends that may influence the decisions of homeowners and buyers in the coming months.

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