iStock illustration

A nationwide analysis by researchers at brokerage and listings portal Redfin has found that 4 in 5 residential mortgage borrowers have an interest rate below 5 percent, and even more have a rate below 6 percent.

Overall, 91.8 percent of these borrowers have a rate below 6 percent, the researchers found, fleshing out a pair of explanations touted by many in the real estate community about why so few homeowners are listing their properties right now.

On one hand, some sellers are put off by the idea of a higher mortgage rate; the average on a 30-year, fixed-rate loan last week was 6.71 percent, according to Freddie Mac. For many others, industry experts say, today’s higher rates and higher prices mean a seller will likely be paying more for less house. The result: Many of today’s listers are those who have to sell soon for whatever reason, often a major life event.

“High mortgage rates are a double whammy because they’re discouraging both buyers and sellers–and they’re discouraging sellers so much that even the buyers who are out there are having trouble finding a place to buy,” Redfin Deputy Chief Economist Taylor Marr said in a statement. “The lock-in effect is unlikely to go away in the near future. Mortgage rates probably won’t drop below 6% before the end of the year, and most homeowners wouldn’t be motivated to sell unless rates dropped further. Some of them simply don’t want to take on a 6%-plus mortgage rate and some can’t afford to.”

Marr and his colleagues outlined three hypothetical homeowners in their report: one who bought a home priced at the national median of $280,000 in 2018 with the then-average mortgage rate of 4.5 percent; one who bought a median-priced $320,000 home with a 3 percent loan; and one who bought a median-priced $425,000 home in mid-2022 with a 5 percent loan.

The first and second homeowners have a mortgage payment $1,540 lower than their contemporary buying a $380,000 home – the current national median price – who would have a $2,600 monthly payment. The third homeowner has a $2,400 monthly payment, by contrast, but because they just bought a house is unlikely to consider listing, Redfin researchers wrote.