Mortgage Rate Lock‑In and Homeowners’ Moving Plans

Aidala, Felix; Haughwout, Andrew F.; Hyman, Benjamin; Somerville, Jason; Van der Klaauw, Wilbert

Discussion Paper

Mortgage Rate Lock‑In and Homeowners’ Moving Plans

Abstract: The U.S. housing market has had a tumultuous few years. After falling to record lows during the pandemic, the average 30-year mortgage rate rapidly increased in 2022 and 2023 and now hovers near a two-decade high of 7.2 percent. For those that locked in a low mortgage rate prior to 2022, this steep increase has significantly increased the cost of moving, as taking out a mortgage at current rates would potentially increase their monthly housing payment by hundreds or thousands of dollars, even if the amount they borrowed remained unchanged. As shown by Ferreira et al. (2011), this lock-in effect has the potential to reduce geographic mobility and turnover in the housing market and has gained the attention of Federal Reserve leaders. In this post, we utilize special questions from the Federal Reserve Bank of New York’s 2023 and 2024 SCE Housing Surveys to estimate the extent to which mortgage rate lock-in is suppressing U.S. household’s moving plans.

Keywords: mortgage rates; lock in; mobility;

JEL Classification: R2; R3;