The average mortgage borrower has locked in a rate that is well below current rates. @luliu_fin and I show that this locks homeowners into their homes, making them less likely to move. The White House is proposing a new tax credit to try to unlock the lock-in. A quick thread:
Julia Fonseca
88 posts
Associate Prof of Finance at UIUC @giesbusiness
Joined February 2010
- @luliu_fin and I updated our mortgage lock-in paper to show that a 1 p.p. decline in the difference between mortgage rates locked in at origination and current rates reduces moving by 16% between 2022-2024, compared to 9% between 2010-2024.
- Had a great time talking to the folks at NPR’s @theindicator about mortgage lock in and my work with @luliu_fin. In 10 min, we touch on why mortgage lock in is so important, what @luliu_fin and I find, and the policy implications and trade offs:
- Replying to @AtifRMianReally cool video! There's actually work using deep learning to solve macro and finance models: papers.ssrn.com/sol3/papers.cf…
- First-time homebuyers are facing 3 related challenges: high mortgage rates, high house prices, and low inventory. How can policymakers help? @luliu_fin and I wrote our thoughts on this for MarketWatch, informed by our work on mortgage lock-in.
- @JuliaAFonseca and I have an exciting new pre-doc opportunity to work with us on mortgage, housing and labor markets, which will involve both empirical and structural work, and tackling public policy questions! Please share. @econ_ra #EconTwitter
- Replying to @nomadj1s @agoodmanbacon and 4 othersThank you all for doing this. Really helpful and encouraging!
- Replying to @JuliaAFonsecaFirst, 80-90% of sales are of existing homes, and both the buyer and the seller typically have mortgages. For the owner of a starter home to sell, they will have to find another home to buy. If the price of this home is above the median, its seller isn't eligible for the credit.
- Replying to @HannoLustig and @degryse_hansThat’s right! Mortgages in the US are generally not portable and only FHA, USDA, and VA mortgages are assumable.
- Replying to @JuliaAFonsecaLink to updated draft: papers.ssrn.com/sol3/papers.cf…
- Replying to @JuliaAFonsecaBut that leads us to the second reason: the tax credit isn't very large relative to how much low mortgage rates are worth to borrowers. @luliu_fin and I estimate that the average borrower would need $50k to compensate them for giving up the rate that they've locked in.
- Replying to @JuliaAFonsecaFreddie Mac also estimated this dollar value and put it at $66k, similar to our estimate. The maximum tax credit of $10k is small relative to this amount, so it might not be enough to incentivize even one seller to sell, let alone two.





