As interest rates rise, one concern is that a reluctance to give up a record low mortgage rate will deter Americans from moving home, restricting sales. But while that may put some households off moving, life events will still happen, and the pay rise needed to compensate for the loss of a low mortgage rate is well within the realms of possibility. Any adverse impact on sales should therefore be low. Trump’s victory, and the prospect of a fiscal stimulus, has led us to revise up our already above-consensus interest rates forecasts. We now expect 30-year fixed mortgage rates to reach just over 5.5% by the end of 2018. As rates rise many households will have to choose between moving and giving up a record low mortgage rate, or staying put. But will rate “lock-in” be a major drag on home sales?
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