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Mortgage Rate Lock‑In and Homeowners’ Moving Plans

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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.

Suggested Citation

  • Felix Aidala & Andrew F. Haughwout & Benjamin Hyman & Jason Somerville & Wilbert Van der Klaauw, 2024. "Mortgage Rate Lock‑In and Homeowners’ Moving Plans," Liberty Street Economics 20240506, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:98183
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    More about this item

    Keywords

    mortgage rates; lock in; mobility;
    All these keywords.

    JEL classification:

    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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