Despite signs that The “lock-in” effect begins to wear offMany homeowners who secured rock-bottom mortgage rates during the pandemic are still waiting for rates to fall before taking action.
This phenomenon results in current mortgage borrowers being held in so-called “golden handcuffs” as they choose not to move – even though they may want or need to – in order to stick with their existing interest rate.
“A low-interest mortgage is a fantastic benefit for homeowners, but sometimes a good location can limit your options,” said Danielle Hale, chief economist at Realtor.com (NWSA). “Even though mortgage rates have fallen, market rates for most homeowners remain above current rates, leaving them trapped in ‘golden handcuffs.’
In 2020 and 2021, mortgage rates fell below 3% and oscillated around this level. However, last year they exceeded 7%, leaving people stuck with their current contracts while they waited out high interest rates.
Mortgage rates have been falling in recent months (although they saw a slight increase last week), with the current rate on 30-year mortgages still somewhere above 6%. Goldman Sachs (GS) expects a conforming mortgage rate for a 30-year reach 6.0% by the end of the year and 6.05% in 2025.
This will likely help ease some supply as homeowners may be more willing to move as mortgage rates continue to fall. This is particularly true in cities with a higher share of mortgages, where supply has been restricted by “golden handcuffs” in recent years.
These are the 10 U.S. metro areas with the highest percentage of homes with a mortgage—and therefore, according to Realtor.com, the cities that could see the biggest changes as interest rates fall.
