The “lock-in effect” that has shaped the housing market in recent years is showing gradual signs of change, according to a Realtor.com analysis of the Federal Housing Finance Agency’s National Mortgage Database.
In the first quarter of 2025, 81 percent of outstanding mortgage debt carried interest rates below 6 percent. That figure marked a 4.4 percentage point increase from the first quarter of 2024, reflecting how many homeowners remain tied to historically low borrowing costs.
Many mortgages remain below 4 percent
The data showed one in five mortgages (20.7 percent) carry rates below 3 percent, while nearly one-third (32.7 percent) fall between 3 and 4 percent. Another 17.9 percent are between 4 and 5 percent, and 9.9 percent are between 5 and 6 percent. These low rates have discouraged many homeowners from selling, as moving would often mean taking on a higher-cost loan.
Housing economists say this dynamic has kept much of the for-sale housing supply tight, contributing to high home prices across California and nationwide.
Gradual shift expected through 2025
While interest rates have moderated somewhat from their peak, they remain elevated compared to the record lows reached in 2020 and 2021. As new homebuyers take on mortgages at higher rates, the share of loans below 6 percent is expected to decline. Realtor.com projects that by the end of 2025, that figure could drop closer to 75 percent.
The change is slow, but analysts note it could help free up inventory over time, especially if rates stabilize or edge lower.
Local impact on San Gabriel Valley
For communities like El Monte, South El Monte, Baldwin Park, and Rosemead, the lock-in effect has been a factor in limiting the number of available homes for purchase. With fewer owners willing to give up low mortgage payments, buyers face less choice and higher competition.
Local real estate agents report that some homeowners are beginning to consider listing despite higher borrowing costs, often due to life changes such as retirement, relocation, or the need for more space. If the projected shift continues, it could mean more homes available to families and first-time buyers in the San Gabriel Valley by late 2025.
