Fixed-rate mortgages are rent control by stealth

But even buyers who could afford to put their homes up for sale have loans foolish to discard. Though the stock of mortgages with rates below 4% is shrinking fast, roughly half of American borrowers still have them, and only around one-fifth pay above 6%, Federal Housing Finance Agency data suggests.

Households prefer owning to renting because it insures against rising costs. It's also why, since the 1990s, many governments softened the pace of rent increases. Now, the affordability crisis has revived harsher interventions, like Mamdani freezing rents on rent-stabilized apartments and Spain imposing absolute rent-increase caps.

Research finds that fixed-rate mortgages leave households similarly "locked in," reducing listings and sales. A recent model by Kristopher Gerardi, Franklin Qian, and David Zhang estimates that average US house prices would have been about 8% lower between 2022 and 2023 had this effect not been present. One possible reason is that fixed-rate mortgages prevents some owners from selling and becoming renters, removing supply without an equal reduction in demand. Younger borrowers, who tend to want to move toward higher-income neighborhoods, are the most impacted.