Growing Number of Homeowners Are Sacrificing Sub-5% Mortgage Rates To Break Free From ‘Lock-In’ Effect—and Reclaim Their Sanity
Chantea and Jeffrey Coonce were all too aware that it was time to move.
The couple had originally bought their Peoria, AZ, home as a family of three. But now, as a family of five, they were hitting a wall—literally.
“I want my kids to feel like they aren’t constantly struggling for their own space,” Chantea tells Realtor.com®.
The problem is, the Coonces bought their home in 2019, refinanced in the low-rate era, and locked in a 2.5% interest rate. Moving, however necessary, would mean sacrificing their mortgage and its historically low interest rate for a much higher one.
That trade-off—between accepting a higher interest payment for a home better suited to their needs or making do with their current house to preserve a low rate—has been credited with keeping the housing market stagnant since mortgage rates began climbing in 2023.
But a new report from Coldwell Banker suggests that 1 in 3 home sellers this spring are giving up sub-5% mortgage rates—in a promising sign that the mortgage lock-in effect is finally starting to thaw.
The findings from Coldwell Banker are based on a survey of more than 700 real estate agents across the country, and offer a snapshot of the market right before peak homebuying season.
Already, this spring has been a mixed bag. After a strong start, the most recent analysis from the National Association of Realtors® shows that existing home sales are down 1% compared with a year ago, when they matched the historic lows of 2024.
“Inventory remains a major constraint on the market,” NAR Chief Economist Lawrence Yun said in a recent press release. “Because inventory remains limited, the median home price rose to a new record high for the month of March. That price growth has helped the typical homeowner accumulate $128,100 in housing wealth over the past six years.”
To his point, the Coldwell Banker survey names the lock-in effect as “one of the biggest and most persistent constraints on housing supply.” And while that effect has softened in recent years, it’s still persistent.
Just over half of outstanding mortgages (50.6%) still carry rates of 4% or lower, and roughly 78% have a rate below 6%, according to the most recent analysis from Realtor.com of FHFA National Mortgage Database numbers.
Even so, the 6%-or-higher share increased 3.9 percentage points from the end of 2024 in a meaningful jump that signals buyers are persevering in the face of elevated borrowing costs.
However promising, that momentum hasn’t yet reached the levels needed to unstick the market. While 39% of agents say the lock-in effect is not a meaningful factor (or only a minor one) when sellers decide to list, a clear majority (61%) maintain that it remains a major or moderate factor influencing market decisions.
“Working through the lock-in effect will take time,” Jason Waugh, president of Coldwell Banker Affiliates says. “But we are starting to see early signs that it is loosening, particularly in the Midwest and in the West, which could have a meaningful impact on inventory.”
One of the most striking findings from the report is that necessity may be driving the first wave of sellers to part with their low mortgage rates—with 36% of agents saying their clients are listing due to personal life circumstances.
It’s an important reminder that homeownership, at its core, is a lifestyle choice as much as it is a financial one.
“Many homeowners are moving because their life circumstances necessitate a change, driving them to list even when they’re losing a historically low mortgage rate in the process,” says Waugh.
The Coonces are a perfect example of this mentality. After a year of hesitation, the family is closing on a new home this month to give their children room to grow.
“I needed a different home to be able to have that freedom of allowing [our kids] to grow in their rooms, not be worried about them outgrowing everything or fighting over space,” Chantea says.
That motivation mirrors a broader trend among buyers, with 20% of current homebuyers reentering the market this spring after a hiatus, according to Coldwell Banker.
Of those returning, 75% are maintaining their original budgets and 24% have even increased them—proving that for many, the need for a functional home outweighs the desire to wait for lower rates, which only 20% of agents say is still the primary holdup for buyers.
But while life circumstances are what prompted the Coonces to start their house hunt, it was mortgage rates that motivated them to close.
“It’s really hard to leave a 2.5% [interest rate] because interest rates have been so high for quite some time,” Chantea says. “So looking for a new house and upgrading wasn’t something that we were seriously considering until we knew that we could get a somewhat decent interest rate.”
That moment came in late February when rates finally dipped below 6% for the first time in three and a half years.
When Chantea saw the news, she says she texted her husband and the couple started the homeshopping process. They found a new construction home in Surprise, AZ, that offered them everything they needed: space to grow and a mortgage rate under 6%.
The builder initially offered a 4.99% interest rate on a 30-year fixed mortgage. During negotiations, however, the Coonces secured a permanent rate buydown from the builder, lowering their interest rate to 4.373% for the life of the loan.
When asked what was the ultimate deciding factor—the home or the rate—Chantea says, “It was definitely the interest rate. … You don’t want to be changing your whole lifestyle just to manage one mortgage payment.”
The Coonces’ story and the survey findings point to the complicated reality facing homebuyers and sellers this spring: While the golden handcuffs of low interest rates are finally loosening, breaking free requires both persistence and a meticulous plan.
“Buyers are ready to act, but they want homes that provide long-term financial and emotional value, and they’re not rushing into any decision,” says Waugh.
For those prepared to make a move, Chantea advises following her lead: Sit down and build a spreadsheet to clearly define what is and isn’t affordable. She also stresses the importance of consulting experts, such as real estate agents and financial advisers, to cut through the noise of a complex market.
“Don’t just go in blindly and say, ‘Oh, this is a pretty house, I think we’ll be OK,’” Chantea warns. “The only way we could make a smart decision was by breaking it down. You have to look at what’s actually out there, because there are options. We didn’t expect to find a rate as low as we did. It’s important to research rather than just seeing a high headline rate and assuming there’s no hope.”