Mortgages Refuse to Sell: Homeowners with 3%

In Austin, Mortgage rate lock-ins, the pandemic-era phenomena that gave home buyers a unique chance to purchase homes with rock-bottom mortgage rates as low as 5%, 4%, even 3%, continues to be a dominant force in today’s home sales market, says Realtor.com’s just-released Second Quarter Outstanding Mortgage Data report.

The document notes that newly originated mortgages continue to fall. Just 27.8% of outstanding home loans were initiated since mid-2022 when pandemic-era loan rates began to rise. In the meantime, loans that originated from mid-2019 to mid-2022, when rates dropped to historic lows, now account for a record 42.8% of the market.

Many homeowners who are part of this pandemic-era group either bought or refinanced at exceptionally low rates, making it difficult for them to justify moving to new accommodations, unless absolutely necessary, when a new home mortgage would cost considerably more than what they are already paying.

“A mortgage rate below 3% was an extraordinary exception, not a new normal,” said Hannah Jones, senior economist at Realtor.com. “In data going back to 1971, rates fell below that mark only during the pandemic-era window and homeowners are still making decisions around those unusually low rates today.”

“The rate unlock is real, but it’s slow, as low-rate loans gradually age out, are traded up or paid off.”

Mortgage Rate Percentages

This slow unlocking of the housing market ticked up a bit in the second quarter of 2026 but generally held steady as climbing loan rates continue to keep potential buyers away from home buying activity.

Mortgage rates hovered in the mid-6% range through the second quarter of the year, which means some well-qualified buyers were likely able to secure mortgages below 6% during that period. This contributed to a slightly growing share of 5% to 6% mortgage holders along with the growth of mortgages over 6%.

The 30-year fixed-rate mortgage averaged 7.24% as of October 29, 2026, as stated by Freddie Mac.

Mortgage rates that hearken back to the pandemic period are still affecting the real estate market. In Q2 of 2026, 19.2% of outstanding mortgages had an interest rate below 3%, 0.1 percentage points lower than Q1 and down from a peak of roughly 24.6% in early 2022. The Freddie Mac fixed rate on a 30-year loan dipped below 3% in July 2020 and generally stayed there through September 2021.

Highlighting how extraordinary these figures were, this was the only period in the data’s history (compiled since 1971) where rates dropped below the 3% threshold.

The rate distribution barely budged between Q1 and Q2 2026: the sub-3% tally ticked down just 0.1 percentage point, the 3%-4% mortgage “bucket” fell just 0.2 percentage points, 4%-5% was down 0.1 percentage point, 5%-6% was up 0.2 percentage points and 6%+ was up 0.3%, the biggest shift in the group.

Mortgage rates recently surged to 7.4%, cutting into the buying power of home seekers. The recent climb in mortgage rates has meant a pullback in buyer demand and a slowdown in housing market sales. Home listing prices fell 1.4% in September while active listings edged higher, suggesting that sellers have adjusted expectations given current market conditions.

Still, no one wants to sell their existing home with a 4% mortgage to purchase a dwelling with a 7% mortgage.

‘Major Life Events’ Keep Market Moving

If mortgage rates remain above 6%, the share of outstanding loans with rates of 6% or higher could reach 27% to 28.5% by mid-2027, its highest level in more than a decade, the Realtor.com report states.

“Even in today’s high-price, high-rate market, homebuying activity around major life events, such as having kids, a job change or a divorce, keeps the market in motion,” said Jones.

“Easing inflation and lowering mortgage rates should also bring more sellers off the sidelines, adding inventory which relieves price pressure and competition in today’s under-supplied housing market. However, the recent surge in mortgage rates has pushed expectations of recovery further afield.”

Refinancing Wave Reshaping Mortgages

The 2020–2021 refinancing wave is now reshaping the age of outstanding mortgages. The 5-to-7-year loan group grew from 40.8% last quarter to a record 42.8% in Q2 as pandemic-era buyers and refinancers continue to hold fast to their loans, overtaking the newer-loan group that historically made up the largest share. Many homeowners in this group locked in exceptionally low rates and have no anticipated gain from giving up their low-mortgaged home for a new one with a more expensive mortgage.

Mortgages less than four years old have fallen from roughly six in 10 in 2023 to fewer than three in 10. As fewer new loans enter the market, the gradual decline in low-rate mortgages indicates owners are trading up to a higher rate or paying off an existing loan. It doesn’t represent a broad thaw in housing activity, said the Realtor.com report.

Mortgage Landscape a Year from Now

“We expect mortgage rates to remain elevated over the next year, which means the vast majority of mortgage originations will fall into the 6%-plus “bucket,” Jones said. “We consider two paths for new mortgages at 6% or higher. They either replace existing lower-rate loans, keeping the total number of mortgages roughly flat, or add to the total without paying off older loans. In both cases, the higher-rate share grows, landing somewhere between 27% and 28.5%, and lower-rate loans lose share.

The difference is whether lower-rate loans decline in number or become a smaller portion of a larger pool. The actual outcome is likely to fall between these scenarios.

Lock-in remains the dominant force, says the report, with the market’s center of gravity still slowly tilting toward higher rate loans. Lock-in is easing, but only as low-rate loans age out, are traded up or are paid off. How fast it moves depends on sales volume and rates. A drop in rates below 6% would steer new loans into the 5% to 6% “bucket,” slow the 6%+ climb and make the trade-up math a bit less painful.