The Lock-In Effect Is Loosening: A Quiet Shift in the Housing Market

For the last several years, one phrase has shaped the housing conversation more than almost any other: the mortgage rate lock-in effect.

During the pandemic, millions of homeowners locked in historically low mortgage rates—many below 3%. While that was great news at the time, it also created a challenge for the broader housing market. Selling a home meant giving up a once-in-a-generation rate and replacing it with something much higher. For many homeowners, that simply didn’t make sense.

The result? Fewer homes for sale, tighter inventory, and a market that often felt stuck.

As we move into 2026, however, something important has changed.

For the first time, more homeowners now have mortgage rates above 6% than those with rates below 3%. It’s a subtle shift—but one that signals a meaningful turning point for housing supply.

A Changing Mortgage Rate Landscape

By the end of 2025, more than one in five outstanding mortgages carried a rate above 6%, the highest share we’ve seen in about a decade.

This shift didn’t happen because of a housing boom. It happened gradually.

Even in slower housing markets, millions of Americans still buy homes each year. Over the last several years, nearly all of those new mortgages were originated at higher rates. Each year, more homeowners entered the market with mortgage payments that look much closer to today’s “normal.”

Over time, that matters.

Why the Lock-In Effect Is Easing

The lock-in effect was strongest when the gap between existing mortgage rates and current rates was extreme. A homeowner with a 2.75% rate faced a steep financial hurdle to move.

But homeowners with rates starting in the 6% range don’t face the same barrier.

When your rate already reflects today’s market, the decision to move becomes less about protecting a historic rate and more about real life—career changes, growing families, downsizing, relocating, or finding a home that better fits your needs.

When rates feel more “normal,” flexibility returns.

Why This Shift Is a Positive Sign

Higher rates aren’t always easy—but from a market health perspective, this transition is constructive.

As more homeowners hold mortgages closer to current rates:

• More sellers are likely to enter the market

• Listing activity can gradually increase

• Inventory pressure may ease over time

• Home prices can adjust in a more balanced way

This doesn’t mean there will be a sudden surge of homes for sale or dramatic market swings. Housing supply tends to improve slowly. But it does mean the artificial freeze caused by ultra-low legacy rates is beginning to thaw.

What This Means Going Forward

The easing of the lock-in effect may not make headlines, but its impact will quietly grow year after year.

As higher-rate mortgages continue to replace ultra-low ones, the housing market becomes more functional. Buyers gain more options. Sellers regain flexibility. And communities benefit from a market that moves with life—not against it.

While today’s rates may look different than the pandemic years, the market itself is becoming less stuck—and that’s a healthy step forward.

If you’re considering a move or simply want to understand how today’s mortgage environment fits into your long-term plans, the BankFirst Mortgage team is here to help guide the conversation—locally, thoughtfully, and with your goals in mind.

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.