The share of U.S. homeowners with high rates on their mortgages has jumped sharply in just the last few years.

That’s having a marked impact on the refinance market and a somewhat more muted impact on home sales. Rates have been front and center in the debate over how to improve home affordability — and for good reason.

In 2022, after mortgage interest rates hit more than a dozen record lows, sparking a refinance bonanza, barely 10% of homeowners had 30-year fixed mortgages with rates above 5%. Just four years later, that share has jumped to over 30%, according to ICE Mortgage Technology. About 20% of borrowers have mortgages with a rate over 6%.

Home sales have been less than robust over the last few years, with the National Association of Realtors reporting a historically low 4.06 million sales last year, basically 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, pushed the share of higher-interest-rate borrowers up.

There has been a major focus by the Trump administration to lower mortgage rates as a way to boost home affordability.

The president recently announced a plan for Fannie Mae and Freddie Mac to buy more than $200 billion in mortgage-backed bonds. It is still a subject of debate as to how much lower that would push mortgage rates once the purchase is made, but just the announcement alone caused rates to drop a bit.

Industry experts say the actual purchases could shave perhaps about an eighth of a percentage point off the current 30-year rate, putting it right around 6%. Last year at this time, the average rate on the 30-year fixed mortgage was just over 7%, according to Mortgage News Daily.  

If the average on the 30-year fixed moved to 6%, 5.5 million current homeowners would be able to benefit from a refinance, according to ICE Mortgage Technology. Those homeowners could save at least 75 basis points on their rate, which makes the fees involved financially worthwhile, it said.

If rates dropped to 5.88%, that number grows to 6.5 million homeowners.

“The most popular interest rate that’s been used to buy a home over the last 3.5 years is between 6.875% and 6.99%, right? Nobody wanted to tell their neighbors they used a 7% interest rate to buy a home, so everybody bought down into this high 6% range,” said Andy Walden, ICE Mortgage Technology’s head of mortgage and housing market research.

“Coincidentally, those 15-basis-point-spread moves from this $200 billion in MBS purchase is moving rates from what would have been six and a quarter right now down to six and an eighth. And so it’s providing meaningfully more refinance incentive than would otherwise be out there, and it’s having an oversized impact on the market,” he said.

Applications to refinance a home loan are now about 120% higher than they were one year ago, according to the Mortgage Bankers Association.

As for home sales, the last four years were characterized by the so-called rate “lock-in” effect, meaning potential sellers didn’t want to give up their historically low rates. They therefore put off moves that they might otherwise have wanted to make.

Entering 2025, there were roughly 39 million homeowners with an interest rate below 5% and roughly 12 million with an interest rate below 3%, according to Walden.

“If you look at how those borrowers behaved last year, only about 6% of those folks gave up those low rates, either through a refinance to pull equity out of their home or through the sale of their home. Close to 95% of homeowners held on to those rates tight,” he said.

As for prospective homebuyers, a 15-basis-point drop on the 30-year fixed rate would save only about $35 a month on the mortgage payment for the average-priced home. Alternately, they could keep the rate and buy 1.5% more home.

“Certainly a move in the right direction, but not a massive movement for those homebuyers,” said Walden.