The Covid Mortgage Lock-In Is Finally Ending

The U.S. housing market just hit an important turning point that makes it easier for homeowners to sell and should increase housing supply over time.

For the first time since the pandemic, there are now more homeowners with mortgage rates above 6% than homeowners holding sub-3% Covid mortgages. As of the end of 2025, 21.2% of existing mortgage holders are paying rates of 6% or higher. That is the highest share since 2015, and it now exceeds the share of ultra-low Covid-era loans.

This matters because the mortgage rate lock-in effect is starting to fade.

Covid mortgages froze the housing market in place. Millions of homeowners locked in 2% or 3% rates had little incentive to sell because doing so meant giving up a historically cheap mortgage for a much higher payment. That dynamic crushed listings, tightened inventory, and pushed prices higher.

That distortion is now easing.

When more homeowners already have rates closer to today’s market levels, the penalty for selling shrinks. A homeowner with a 6% mortgage is far more likely to list a home than one sitting on a 2.5% Covid mortgage. As that share grows, mobility increases.

The shift is driven by simple math. Even in today’s weak sales and refinance environment, roughly 5 to 6 million Americans take out a new mortgage each year. Nearly all of those loans are now being originated at rates above 6%. Each year, high-rate mortgages replace older Covid-era loans, steadily eroding the lock-in effect.

The change has been significant. The share of 6%+ mortgages is nearly triple its pandemic low. At the same time, the stock of Covid mortgages continues to shrink as homes turn over, refinances reset, and life events force moves.

This is not bad news. It is a necessary step toward a healthier housing market.

More sellers mean more listings. More listings mean more inventory. And more inventory is the only durable way to ease pressure on home prices without heavy-handed government intervention.

Housing affordability remains strained, especially for first-time buyers. High interest rates still matter. But a market that allows people to move again is far healthier than one locked in place by a once-in-a-generation shock.

The housing market does not need artificial stimulus. It needs normalization.

The slow fade of Covid mortgages shows that normalization is finally underway.