The share of homeowners in the United States with mortgage rates of at least 6% hit a 10-year high, new industry data shows.
The weekly average mortgage rate has remained above 6% since September 2022, steadily growing the share of mortgages with rates of 6% or more to 19.7% in the second quarter of this year. It has risen 0.8 to 1.4 percentage points each quarter for the past two years, according to a new report from Redfin, a subsidiary of Rocket Cos.
Many people took advantage of historically low mortgage rates during the housing boom from 2020 to 2022, as existing home sales spiked to its highest level in more than a decade and at least a third of home sales were refinanced. That has led to a lock-in effect, with homeowners choosing to stay out of the market instead of buying a home at a higher rate, Redfin said.
Americans are warming up to the higher mortgage rates, though, with the share of mortgages below 3% falling to 20.4% in the second quarter from a peak of 24.6% in the first quarter of 2021. The share of mortgages with a rate below 6% has also dropped to 80.3% from 92.7% three years ago, the data showed.
Redfin’s head of economics research, Chen Zhao, said the easing of the lock-in effect has been a result of an increase in inventory.
“More homeowners are deciding it’s worth moving even if it means giving up a lower mortgage rate,” Zhao said in a press release. “Life doesn’t stand still – people get new jobs, grow their families, downsize after retirement, or simply want to live in a different neighborhood. Those needs are starting to outweigh the financial benefit of clinging to a rock-bottom mortgage rate. As a result, more homes are hitting the market than we’ve seen in years, giving buyers a wider range of choices.”
Mortgage rates have stayed between 6% and 7% for most of this year, hitting a low of 6.13% last month before the Federal Reserve’s federal funds rate cut. But as of Friday, interest rates climbed back up to 6.38%, and Redfin economists expect them to remain in a similar range over the next 12 months.
But the rise in inventory and decline in rates has not led to a substantial increase in sales yet.
“A lot of people want to buy and they’re just hanging around waiting,” said Mariah O’Keefe, a Redfin Premier real estate agent in Seattle, in the release. “Rates have not gone down significantly enough to move the needle – prospective buyers need to see a bigger difference in their potential monthly payment before things are going to change. If rates tick down below 6%, that will bring a lot of people back into the market.”
