Researchers Mahir Rasheed and James Finucane highlighted that homeowners saved $600 billion through low mortgage rates since the pandemic, boosting spending by about 2%.
The mortgage lock-in effect, wherein homeowners retain lower fixed-rate mortgages, has helped sustain consumer demand even amid rising rates, complicating Fed policy effectiveness.
Despite the Federal Reserve raising its policy rate significantly in 2022 and 2023, the high percentage of homeowners with low fixed-rate mortgages mitigated expected economic slowdowns.
As of mid-2024, the mortgage market presents a stark contrast, with the prevailing market rates nearing 7% against an average existing mortgage rate of around 4%.
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