An aerial view of houses in San Francisco, August 27, 2025.
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The share of U.S. homeowners with high mortgage rates has increased sharply in recent years alone.
This has a marked impact on the refinancing market and a somewhat more moderate impact on home sales. Rates have been at the center of the debate over how to improve housing affordability – and for good reason.
In 2022, after mortgage interest rates hit more than a dozen record highs, triggering a refinancing bonanza, just 10% of homeowners had 30-year fixed mortgages with rates above 5%. Just four years later, that share has climbed to more than 30%, according to ICE Mortgage Technology. About 20% of borrowers have mortgages with rates above 6%.
Home sales have been less than robust in recent years, with the National Association of Realtors reporting an all-time low of 4.06 million sales last year, virtually unchanged from 2024. This, after hitting a 15-year high of 6.12 million home sales in 2022.
More recent sales, combined with some cash-out refinancing, have boosted the share of borrowers receiving higher interest rates.
The Trump administration has focused on lowering mortgage rates to make housing more affordable.
The president recently announced a plan to allow Fannie Mae and Freddie Mac to purchase more than $200 billion in mortgage-backed bonds. How much this would lower mortgage rates once a purchase is made is still up for debate, but the announcement alone caused rates to drop a bit.
Industry experts estimate that actual purchases could shave about an eighth of a percentage point off the current 30-year rate, bringing it down to about 6%. This time last year, the average rate for a 30-year fixed mortgage was just over 7 percent, according to Mortgage News Daily.
If the average 30-year fixed reached 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 fees involved financially worthwhile, according to the report.
If rates drop to 5.88%, that number increases to 6.5 million homeowners.
“The most popular interest rate used to buy a home over the last 3.5 years has been between 6.875% and 6.99%, right? No one wanted to tell their neighbors that they used a 7% interest rate to buy a home, so everyone bought in that high 6% range,” said Andy Walden, head of mortgage and housing market research at ICE Mortgage Technology.
“Coincidentally, these 15 basis point spread movements relative to this $200 billion MBS purchase take rates from what would have been six and a quarter currently to six and eighth. So that provides significantly more refinancing incentive than there would otherwise be, and that has an outsized impact on the market,” he said.
Requests to refinance a home loan are now about 120% higher than a year ago, according to the Mortgage Bankers Association.
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 were unwilling to give up their historically low rates. They therefore postponed actions that they might otherwise have wanted to take.
In 2025, there were about 39 million homeowners with an interest rate below 5% and about 12 million with an interest rate below 3%, according to Walden.
“If you look at the behavior of these borrowers last year, only about 6% of them gave up these low rates, either through refinancing to take out the equity in their home or selling their home. Nearly 95% of homeowners held firm on these rates,” he said.
As far as potential buyers are concerned, a 15 basis point drop in the 30-year fixed rate would only save about $35 per month on the mortgage payment on an average-priced home. Alternatively, they could maintain the rate and buy 1.5% more house.
“It’s certainly a step in the right direction, but not a massive move for these buyers,” Walden said.
