Aerial view of San Francisco homes, August 27, 2025.
Justin Sullivan | Getty Images
The percentage of U.S. homeowners with high mortgage rates has risen sharply in recent years.
While this has had a noticeable impact on the refinance market, the impact on home sales has been somewhat modest. Interest rates have been at the forefront of discussions about how to improve housing affordability, and for good reason.
In 2022, after mortgage rates hit more than a dozen record lows and sparked a refinancing boom, only 10% of homeowners took out 30-year fixed mortgages with interest rates above 5%. Just four years later, that share has jumped to more than 30%, according to ICE Mortgage Technology. Approximately 20% of borrowers have mortgages with interest rates above 6%.
Home sales have not been very strong in recent years, and according to a report by the National Association of Realtors, the number of home sales last year was a historic low of 4.06 million, and in 2022, the number of home sales was 6.12 million, the highest in 15 years, but almost unchanged from 2024.
Recent sales and some cash-out refinancings have increased the share of high-interest borrowers.
The Trump administration has focused on lowering mortgage rates as a way to increase housing affordability.
The president recently announced plans for Fannie Mae and Freddie Mac to purchase more than $200 billion in mortgage-backed bonds. The extent to which mortgage rates will fall after the purchase is made is still a subject of debate, but this announcement alone caused rates to fall slightly.
Industry experts say the actual purchase price will likely be about an eighth of a percentage point below the current 30-year rate, or about 6% to be exact. At this time last year, the average interest rate on a 30-year fixed mortgage was just over 7%, according to Mortgage News Daily.
According to ICE Mortgage Technology, 5.5 million current homeowners could benefit from refinancing if the average 30-year fixed rate rose to 6%. These homeowners could potentially save at least 75 basis points on interest rates, making the fees economically worthwhile, the report said.
If interest rates drop to 5.88%, that number increases to 6.5 million homeowners.
Andy Walden, head of mortgage and housing market research at ICE Mortgage Technology, said, “The most common interest rates used to buy homes over the last three and a half years have been between 6.875% and 6.99%. Nobody wanted to tell their neighbors they bought a house at 7%, so everyone bought into that low 6% range.”
“Coincidentally, the 15 basis point spread movement from this $200 billion MBS acquisition has now reduced interest rates from 6.5x to 6.8x, so it’s providing meaningfully more refinancing incentives than would otherwise exist, which has an outsized impact on the market,” he said.
Mortgage refinance applications are currently up about 120% compared to a year ago, according to the Mortgage Bankers Association.
In terms of home sales, the past four years have been characterized by a so-called interest rate “lock-in” effect. This means potential sellers didn’t want to give up historically low interest rates. Therefore, they postpone moves they might have originally wanted to make.
According to Walden, by 2025 there will be about 39 million homeowners with interest rates below 5% and about 12 million with interest rates below 3%.
“If you look at what these borrowers did last year, only about 6% foregone their low interest rates by refinancing or selling their home to extract equity in their home. Nearly 95% of homeowners held on to their low interest rates,” he said.
For prospective homebuyers, a 15 basis point drop in 30-year fixed rates would only save about $35 a month on mortgage payments for an average-priced home. Alternatively, you can maintain the interest rate and buy a home at an additional 1.5%.
“It’s certainly a move in the right direction, but it’s not a massive move for homebuyers,” Walden said.
