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Rate Lock Will Worsen Home Sales

"Rate lock" is not a common term in real estate, but it is pretty easy to understand. And once you understand it, you will appreciate why trade volume in real estate is going to continue to stay low for a long time, and possibly why the stock market is in for a continued rise.

Today's homeowners are probably in a loan product that is somewhere around 3.31 percent to 4 percent. If they decide to sell, they will need a new loan product that will probably be around 5 percent. That difference of 1 percent or 2 percent is what causes the "rate lock" effect.

When consumers trade houses, the unpaid balance of their loan will see a significant increase in the interest paid on that loan. That is a pretty significant hit that adds cost to the transaction.

Rate Lock Is Likely to Get Worse Before It Gets Better

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