By Kerry Smith
Homeowners don’t want to lose a mortgage rate that saves them hundreds of dollars a month, of owners with a current mortgage, 1 in 4 enjoys a rate less than 3%.
SEATTLE – More than nine of every 10 (91.8%) U.S. homeowners with a mortgage have an interest rate below 6%, according to a report from Redfin. Yet new buyers are facing a median rate of 6.71%, according to Freddie Mac’s most recent survey, and that’s down from 6.79% the week before.
And many current homeowners with a mortgage have a rate lower than that, such as the two out of five who have a mortgage rate below 5%, and the one out of four that enjoy a rate below 3%.
Rates for current homeowners with a mortgage
- Below 6%: 91.8% of U.S. mortgaged homeowners have a rate below 6%, down from a record high of 92.9% in the second quarter of 2022.
- Below 5%: 82.4% have a rate below 5%. That’s down from a peak of 85.7% in the first quarter of 2022.
- Below 4%: 62% have a rate below 4%, also down from a record high (65.3%) hit in the first quarter of 2022.
- Below 3%: 23.5% an interest rate below 3%, near the highest share on record. The highest was 24.6% in the first quarter of 2022.
The mortgage rate “lock-in” effect has pushed inventory down to record lows this spring. Both new listings and total listings have dropped to their lowest levels on record for this time of year. And that fuels homebuyer competition in some markets and keeps home prices from falling further.
Right now, nearly every U.S. homeowner who moves takes on a higher mortgage rate. As a result, most people who don’t have to move, don’t move. Pending home sales are down about 17% from a year ago.
“High mortgage rates are a double whammy because they’re discouraging both buyers and sellers – and they’re discouraging sellers so much that even the buyers still out there have trouble finding a place to buy,” says Redfin Deputy Chief Economist Taylor Marr. “The lock-in effect is unlikely to go away in the near future.”
When will the homeowners decide it’s time to list their home and move? “Mortgage rates probably won’t drop below 6% before the end of the year, and most homeowners wouldn’t be motivated to sell unless rates dropped further,” says Marr. “Some of them simply don’t want to take on a 6%-plus mortgage rate and some can’t afford to.”
An earlier Redfin survey in June found that 27% of homeowners who would consider listing their home in the next year would feel more urgency to sell if rates dropped to 5% or below. Roughly half (49%) would feel more urgency if rates dropped to 4% or below, and the share increases to 78% if rates dropped to 3% or below.
However, a drop to 3% is highly unlikely anytime soon.
“The only people selling right now are the ones who need to,” says Atlanta Redfin Agent Jasmine Harris. “The last three potential sellers I’ve met are people moving out of the country. I’m also working with someone who’s moving out of town for a new job and another person who needs a smaller home for health reasons.”
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