“Locked-in” Homeowners Nevertheless Pay Off Below-4% Mortgages: their Share Drops to Lowest since Q4 2020

Core Insights - The share of below-3% mortgages has decreased to 20.0% in Q3, the lowest since Q1 2021, down from 24.6% at the peak in Q1 2022 [1] - The overall share of mortgages below 4% has dropped to 51.5%, the lowest since Q4 2020, as homeowners are selling their homes due to life changes [5] - The share of 6%-plus mortgages rose to 21.2% in Q3, the highest since Q3 2015, indicating a significant shift in the mortgage landscape [17] Mortgage Rate Trends - The share of 3% to 3.99% mortgages has declined to 31.5%, the smallest since Q2 2019, reflecting a broader trend of rising mortgage rates [2] - The share of 4.0% to 4.99% mortgages has decreased to 17.1%, the lowest since 2013, showing that many homeowners have refinanced into lower-rate categories [12] - The share of Adjustable-Rate Mortgages (ARMs) has remained low, dipping to 4.0% in Q3, down from over 10% in 2013 [8] Market Dynamics - The "lock-in effect" is causing homeowners with ultra-low interest rates to hesitate in selling their homes, impacting real estate transactions and mortgage originations [21][22] - Despite the lock-in effect, life events are still prompting some homeowners to sell, gradually unlocking the housing market [25] - The ultra-low mortgage rates, which were below inflation, contributed to a significant increase in home prices, creating a challenging environment for potential buyers [20][26][27]