Is Mortgage Lock-In Responsible for Housing Market Tightness?

Aaron Graybill () and Kyle Mangum

No 26-33, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: Elevated mortgage rates discourage homeowners from moving, as relocating triggers a reset of mortgage terms — a phenomenon termed “lock-in.” This paper examines whether elevated rates explain recent real estate market tightness: low transaction volumes, low time-on-market, and sustained price growth. Using transaction-level data, we estimate survival models of housing tenures — the probability of sale as a function of tenure and market conditions, including mortgage rate gaps. These estimates quantify missing sellers who have not entered the market because of elevated rates. We then calibrate a search and matching model measuring mortgage rate effects on buyers alongside seller lock-in effects. Results indicate lock-in causes sellers to withdraw, reducing transactions. However, buyers are more sensitive to mortgage rates than sellers are to lock-in, meaning a rate drop would increase sales volumes but not reduce market tightness.

Keywords: mortgage lock-in; search and matching; market tightness; survival models (search for similar items in EconPapers)
JEL-codes: E32 G21 R31 (search for similar items in EconPapers)
Pages: 52
Date: 2026-07-10
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DOI: 10.21799/frbp.wp.2026.33

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