Nearly nine in 10 US homeowners have mortgage rate below 6 percent: report

Nearly nine in 10 U.S. homeowners have a mortgage rate below 6 percent, according to a new report from the real estate company Redfin.

Some 88.5 percent have a mortgage rate below 6 percent, down from a high of 92.8 percent in in the second quarter of 2022, the report found. 

More than three-quarters of homeowners — 78.7 percent — have a mortgage rate below 5 percent, while nearly six in 10 — 59.4 percent — have a mortgage below 4 percent. Just 22.6 percent have a mortgage rate below 3 percent, according to Redfin.

As the average mortgage rate currently sits at 6.66 percent, Redfin noted that many homeowners are opting to stay put in order to avoid higher rates, resulting in a phenomenon known as the “lock-in effect” that is helping fuel the country’s housing shortage. 

“A lot of sellers are worried about finding their next house because even though listings are rising, there’s still a housing shortage. That’s part of the reason so many sellers remain on the sidelines,” David Palmer, a Redfin Premier real estate agent in Seattle, said in a statement

However, mortgage rates are lower than they were earlier this year, after climbing to nearly 8 percent in October, leading some homeowners to consider selling, according to the real estate company.

“Sellers have started coming out of the woodwork because that’s typical for January and because mortgage rates have dropped,” Palmer said.

“They’re also coming to terms with the fact that rates aren’t going back down to 3 [percent] any time soon, which makes it easier to pull the trigger on selling," he added.

Mortgage rates have climbed over the last two years alongside interest rates, which the Federal Reserve has repeatedly hiked in an effort to tame stubbornly high inflation. However, the central bank appears to be nearing an end to its rate hike campaign, after holding rates steady at its last three consecutive meetings.

Financial markets are also increasingly hopeful that the Fed will begin cutting interest rates this year, after most Fed officials indicated in their economic projections in December that they anticipate at least two rates cuts in 2024.

The Redfin report is based on data from the third quarter of 2023 from the Federal Housing Finance Agency's (FHFA) National Mortgage Database.