In mid-2024, Bankrate’s Mortgage Sentiment Survey revealed that most homeowners aren’t prepared to shop for a new home at current rates. More than half (52%) indicated they would only consider buying if rates drop below 6%. Meanwhile, 38% remain completely on the sidelines, with no current rate enticing them to move this year. Additionally, 20% are holding out for what seems impossible: rates under 3%. As of September 2024, 30-year mortgages were hovering between 6.2% and 7%, according to Bankrate, which is well above most people’s “comfort zone.” This discrepancy between expectations and reality helps explain why for-sale inventory remains tight and many potential buyers feel stuck.
People are hesitant because today’s mortgage payments feel like a shock. Someone with a $400,000 loan at 3% pays about $1,686 a month, while at 7%, that same loan jumps to roughly $2,661. Even a 1% difference in mortgage rates significantly alters the financial picture. In March 2025, Bankrate’s survey showed that 47% of homeowners won’t start house hunting until rates dip below 5%. On the selling side, 35% need rates under 6% to list their home, and another 42% say no current rate would motivate them to sell. This stalemate is likely to persist until the U.S. government eases policy or household incomes rise enough to absorb the higher monthly payments.
The Mortgage Lock-In Effect
While many homeowners secured mortgage rates between 3% and 4% during the pandemic, according to Freddie Mac, the exact percentage has declined over time. As of Q1 2025, around 82.8% of U.S. homeowners with mortgages have rates below 6%, down from a peak of 92.7% in Q2 2022, based on Business Wire. If they sell and buy again, their interest rate could double.
In 2020, Jennifer Lovelace purchased a $215,000 home in Florida with a 30-year loan at 3.25% interest, as reported by The Sun. Her monthly payment, including taxes and fees, was approximately $1,300. By 2024, her family had grown, necessitating more space. However, today’s higher home prices and mortgage rates near 7% would push her payment above $2,500 for the same location. Faced with that significant increase, she’s stuck in her starter home, waiting for either prices or rates to drop before moving.
This “lock-in effect” discourages people from listing their homes. A family paying $1,800 a month on a 3% mortgage would see that payment jump to about $2,700 if their rate rose to 6.5%. They would need around $12,000 more in annual income just to break even. Bankrate cautions that even if the U.S. government reduces its policy rate, mortgage rates could remain above 6% due to factors like investor demand and inflation.
Practical Steps for Buyers
Mortgage rates are unlikely to fall below 6% soon. However, Bankrate’s 2025 mortgage forecast predicts that a 30-year fixed rate will fluctuate near 6.5% through the end of the year, with a sustained sub-6% level potentially not arriving until 2026 or later. This outlook is due to persistent inflation and the Federal government’s gradual approach to reducing benchmark rates, which directly influence mortgage pricing.
For buyers, waiting indefinitely isn’t practical. Instead, focus on improving your credit score to qualify for the best mortgage rates, even if it’s just by 20 points. Reduce your debt-to-income ratios by paying down credit cards or auto loans. Another approach is to monitor rate trends weekly and be ready to lock in rates during brief dips into the high-5% range, as temporary windows may offer the best near-term opportunity.
You should also aim to secure a mortgage based on your monthly income. When you apply for a mortgage, lenders assess your gross monthly income and total debts, including the new mortgage payment, to calculate your debt-to-income (DTI) ratio. A lower DTI indicates you have sufficient income to manage your bills and usually earns you a better interest rate. Most lenders won’t approve a DTI higher than 43%, so the size of the loan you qualify for depends directly on your income. Therefore, keep your mortgage amount in line with what you earn to demonstrate you can afford the payments and boost your chances of getting approved.
