Mortgage Trap: As 30 Yr. Rates Edge Closer To 5%, It’s Creating A ‘Trap’ That Could Make Housing Market Worse


One big factor that helped numerous homeowners save money is ultimately hurting homebuyers. Call it the interest rate trap.

Years of historically low rates, especially in the last two years, have helped millions of homeowners refinance into mortgages with rates between 2% and 4%, lowering their monthly payment by hundreds of dollars.

Now as mortgage rates near 5%, these same homeowners are thinking twice when it comes to trading up, adding to the inventory shortage that is creating an affordability crisis for buyers.

“Existing homeowners have a disincentive to sell because every dollar borrowed costs more,” Mark Fleming, chief economist at First American Financial Corporation, told Yahoo Money. “The financially rational decision is not to sell.”

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