Mortgage interest rates slipped lower over the past week, settling at the lowest level of 2025, but remaining elevated enough to stifle normal levels of buying and selling in the housing market.

In the week ending Feb. 6, 30-year fixed-rate mortgages averaged 6.89%, Freddie Mac announced Thursday. Those figures don’t include fees and points, and rates in some parts of the country may be higher or lower than the national average.

It now takes 33.5% of the median household income to make a mortgage payment on the average priced home, according to data from Intercontinental Exchange (ICE). That pencils out to a $2,395 monthly payment. It's below a recent peak of 37.2% in October 2023, when mortgage interest rates stood at 7.62%.

But high rates and prices don’t just impact those trying to buy a home. Current owners thinking about trading up or down, or moving to a different part of the country, must also consider whether their home will be affordable for the pool of buyers who might be interested.

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Even more importantly, roughly 83% of all homeowners with a mortgage have an interest rate below 6%, real estate brokerage Redfin recently reported. With current mortgage rates much higher than that, many people prefer “to stay put instead of selling and buying another home at a higher rate—a phenomenon called the ‘lock-in effect’,” Redfin explained.

America has a severe housing shortage, often estimated to be at least 4 million homes, because of the lock-in effect and other factors. In 2024, home sales were at the lowest level since 1995.  

Despite that, demand seems resilient. Mortgage applications to purchase a home were the same in the first few weeks of 2025 as in 2024 despite a big jump in rates, ICE noted. That's important because few in the industry expect a big improvement in rates any time soon. ICE's analysis points to 30-year fixed-rate mortgages of about 6.6% in July, and other forecasters expect them to finish the year near 6.5%.

With time, the lock-in effect will gradually ease, Redfin thinks: some people must move because they have a life change like a new job, a new baby, a death or a divorce. Also, “many Americans are growing accustomed to the idea that rates are unlikely to fall to pandemic lows anytime soon,” the company's analysts wrote.

What’s more, higher home prices have left many households with so much home equity that it may feel worth it to move on. The median price of a previously-owned home was $404,400 in December, up nearly 50% in five years. That’s another factor that keeps the market sharply divided between the Americans who already own and those trying to get a foot in the door.