Mortgage interest rates have decreased over the last week, reaching the lowest point so far in 2025, although they remain high enough to hinder typical buying and selling activity in the housing sector.

For the week ending February 6, 30-year fixed-rate mortgages averaged 6.89%, as reported by Freddie Mac on Thursday. These averages do not account for fees and points, and rates may vary in different regions across the country.

Currently, 33.5% of the median household income is needed to cover a mortgage payment for the average-priced home, based on data from Intercontinental Exchange (ICE). This corresponds to a monthly payment of $2,395, which is a decline from the recent high of 37.2% in October 2023, when mortgage rates were at 7.62%.

However, elevated rates and high home prices not only affect prospective buyers but also current homeowners considering buying a larger or smaller home or relocating to another area—they must think about whether their current home can attract potential buyers in this market.

Perhaps more significantly, approximately 83% of all homeowners with a mortgage enjoy an interest rate below 6%, according to recent findings from real estate brokerage Redfin. Because current mortgage rates are considerably higher, many homeowners choose to “stay put” rather than sell and purchase another home at an increased rate—a situation referred to as the ‘lock-in effect,’ as explained by Redfin.

The United States is facing a critical housing shortage, often estimated to be over 4 million homes, due to the lock-in effect and other contributing factors. Home sales in 2024 reached their lowest point since 1995.

Despite this, demand appears to be robust. Mortgage applications for home purchases in the early weeks of 2025 remained similar to those in 2024, even with a significant rise in rates, ICE observed. This is crucial as many industry experts do not anticipate a substantial decrease in rates in the near future. ICE’s assessment suggests 30-year fixed-rate mortgages could trend to around 6.6% by July, with other forecasters predicting an average close to 6.5% by year-end.

Over time, the lock-in effect is expected to diminish, according to Redfin: some individuals will inevitably need to relocate due to changes in life circumstances, such as a new job, the arrival of a child, a death, or a divorce. Additionally, “many Americans are coming to terms with the likelihood that rates will not return to the lows seen during the pandemic anytime soon,” analysts at the company noted.

Moreover, rising home prices have granted many homeowners substantial equity, making it feel worthwhile to consider moving. In December, the median price for an existing home was $404,400, which marks an increase of nearly 50% over the past five years. This situation has created a significant divide in the market between current homeowners and those attempting to enter it.