Rate lock-in: 1 in 3 owners won't budge at any price

With mortgage rates spiking over the last few weeks, many homeowners are unwilling to give up their current rate, a new industry report showed.

Roughly a third of homeowners with a mortgage rate less than 6% would not give up their rate for any reason, and 47% said they couldn't afford current rates, according to a survey of 1,000 mortgage holders from Best Interest Financial and Clever Real Estate.

More than 75% of homeowners had a mortgage rate below 6% as of February, and 41% reported paying below 4%. Among homeowners with sub-3% rates, 52% wouldn't give up their rate for any reason, the report found.

Since rates dropped below 3% in January 2021, the 30-year fixed-rate mortgage climbed higher than 7% in 2024. The 30-year rate dipped below 6% for the first time since 2022 in February, but that relief was short-lived after the Iran war quickly pushed rates back above 6%, according to Freddie Mac.

While rates are still historically low, 10% of homeowners said mortgage payments were their biggest financial stressor, more than the cost of living, health care and retirement savings. More than half of homeowners said they had regrets about their mortgage as well, the report said.

The financial burden weighs heavier on homeowners paying 6% or more, as 63% said they cut back on spending, worked a side gig or made other sacrifices, yet 33% still struggle to keep up with mortgage payments. About 60% also said they couldn't comfortably make their mortgage payments if their income decreased at all, according to the report.

These struggles have fueled homeowners who secured a low rate to stay put, even if their home no longer fits their needs, the report said. This has created a lock-in effect, shortening the housing supply.

Almost 45% of mortgage holders think they will live in their home longer than they initially intended to because of heightened rates, and 20% of borrowers said they felt trapped by their mortgage, the report said.

About half of all homeowners with mortgages said rates impacted their housing decisions. Homeowners prioritize rates over home prices, as 58% said they would rather move when rates are low, compared with 42% who said they prefer low home prices, the report found.

The future of rates largely depends on when the Iran war concludes, which President Donald Trump said will happen "soon" in an address to the nation last week.

While 69% of borrowers don't think rates will ever return to the historic lows seen during the pandemic, 51% said they wouldn't sell unless rates drop below 5%, and 20% would only sell if rates fall below 3%, the report said.