An aerial view of homes in San Francisco, August 27, 2025.
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The share of U.S. homeowners with high mortgage rates has risen sharply in recent years.
This has a significant impact on the refinance market and a somewhat more muted impact on home sales. Interest rates have been at the center of the debate about how to improve home affordability – and for good reason.
In 2022, after mortgage rates hit more than a dozen record lows and sparked a refinancing boom, barely 10% of homeowners had 30-year fixed-rate mortgages with interest rates above 5%. According to ICE Mortgage Technology, that share has risen to over 30% just four years later. About 20% of borrowers have mortgages with interest rates above 6%.
Home sales have been anything but robust in recent years, with the National Association of Realtors reporting a historically low 4.06 million sales last year, essentially unchanged from 2024. This after hitting a 15-year high of 6.12 million home sales in 2022.
More recent sales, coupled with some cash-out refinances, led to an increase in the share of borrowers with higher interest rates.
The Trump administration is emphasizing lowering mortgage rates to increase home affordability.
The president recently announced a plan for Fannie Mae and Freddie Mac to purchase more than $200 billion in mortgage-backed bonds. There is still debate about how much mortgage rates would fall after the purchase, but the announcement alone caused rates to fall slightly.
Industry experts say the actual purchases could lower the current 30-year Treasury rate by perhaps about an eighth of a percentage point, or about 6%. According to Mortgage News Daily, the average interest rate on a 30-year fixed-rate mortgage was just over 7% at this time last year.
If the 30-year fixed rate average increased to 6%, 5.5 million current homeowners could benefit from refinancing, according to ICE Mortgage Technology. These homeowners could save at least 75 basis points on their rate, making the associated fees financially worthwhile, it said.
If rates fall to 5.88%, that number rises to 6.5 million homeowners.
“The most common interest rate used to purchase a home over the last 3.5 years is between 6.875% and 6.99%, right? Nobody wanted to tell their neighbors that they used a 7% interest rate to purchase a home, so everyone bought up to that high rate of 6%,” said Andy Walden, head of mortgage and housing market research at ICE Mortgage Technology.
“Coincidentally, these 15 basis point spread moves from this $200 billion MBS purchase are causing interest rates to fall from the current six and a quarter to six and an eighth. So it provides significantly more refinancing incentives than would otherwise be the case and it has an outsized impact on the market,” he said.
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According to the Mortgage Bankers Association, applications to refinance a home loan are about 120% higher today than they were a year ago.
When it comes to home sales, the past four years have been characterized by what’s known as the “rate lock-in” effect, meaning potential sellers didn’t want to forego their historically low prices. As a result, they postpone steps that they might otherwise have wanted to take.
According to Walden, at the beginning of 2025 there were about 39 million homeowners with an interest rate below 5% and about 12 million with an interest rate below 3%.
“If you look at how these borrowers behaved last year, only about 6% of these people gave up on the low interest rates, either by refinancing to get equity out of their home or by selling their home. Almost 95% of homeowners stuck with those rates,” he said.
As for potential home buyers, a 15 basis point reduction in the 30-year fixed rate would only save about $35 per month on the mortgage payment for an average-priced home. Alternatively, they could keep the interest rate the same and buy 1.5% more home.
“Certainly a step in the right direction, but not a massive step for these homebuyers,” Walden said.