Bankrate: Mortgage Lock-In Effect Unlikely to Ease Soon

(Illustration courtesy of Bankrate)

Nearly half of current homeowners say mortgage rates need to be below 5% for them to be comfortable purchasing a new home, while 38% say they need rates to be below 4%, according to Bankrate, Charlotte, N.C.

Additionally, nearly two in five homeowners say there is no mortgage rate where they would be comfortable purchasing a home this year, Bankrate’s Mortgage Rates Sentiment Survey found.

The last time mortgage rates fell below 6% was in August 2022, the report noted.

“Expectations about mortgage rates keep changing,” Bankrate Analyst Jeff Ostrowski said. “The U.S. economy is still going strong, and the Federal Reserve keeps putting off its first rate cut. Add those things together, and the consensus is that mortgage rates will remain in the range of 6.5% to 7% by the end of 2024.”

Furthermore, three in 10 current homeowners said mortgage rates need to be less than 5% for them to be comfortable selling their home this year, while 21% say they need to be less than 4%, Bankrate found. Overall, 35% of homeowners say they need a mortgage rate less than 6%, while just 5% of homeowners say they would be comfortable selling their home this year with mortgage rates higher than 6%.

Finally, 42% of current homeowners say there is no mortgage rate where they would be comfortable selling their home this year, while 19% say they don’t know what mortgage rate they would need.

“The mortgage lock-in effect has frozen home sales for the past couple of years,” Ostrowski added. “Alas, these results don’t bode well for an unfreezing of the market. Many homeowners aren’t keen to sell at all, and many would-be buyers are waiting for mortgage rates to dip below 6%.”