For the first time in years, more homeowners have a 6% mortgage rate than a 3% one. That’s great news for frustrated buyers.

When Kam Khazai refinanced the mortgage on his townhome in the Washington, D.C., suburb of Gaithersburg, Md., he thought he had scored the deal of a lifetime with a 2.9% rate on a 25-year mortgage.

Two years later, the 41-year-old real-estate agent, who works for the Real Brokerage, gave that sweet deal up. Khazai and his wife, who was pregnant, needed to move to a bigger house. That meant parting ways with that ultralow mortgage rate and taking on a seven-year adjustable-rate mortgage at 6.3% to buy a single-family home set on two acres.

It wasn’t an easy choice. Initially, they thought they would “stick it out and keep the lower payments while the kids are young. But when we found out it was twins, we decided to give it up,” Khazai said. They sold the home in 2023.

“We got the house of our dreams and we are comfortable with the payment,” he said, adding that it can only get better if rates go down.

Today, more homeowners like Khazai are kissing their 3% mortgage rate goodbye as the housing market enters a new era. As of the third quarter of 2025, there were more homeowners with an interest rate of 6% or higher on their mortgage than those with a rate below 3%, according to a MarketWatch analysis of federal mortgage data.

Among active residential mortgages in the U.S., 21.2% had an average interest rate of greater than or equal to 6% at the time of origination, according to federal data, while 20% of mortgages had a rate below 3%.

This represents a massive shift from years past, when rock-bottom mortgage rates had the housing market in a chokehold.

Over the last few years, as the average 30-year mortgage rate climbed from a pandemic-era low of about 2.7% to soar past 7% in 2023, millions of homeowners with rates at 3% and under found themselves constrained.

The “lock-in effect,” where homeowners who didn’t want to give up their relatively low rates refused to sell their homes, effectively froze the housing market. That lack of inventory for sale pushed home prices up, creating affordability challenges for all but the wealthiest of buyers. Many would-be homeowners have been forced to delay buying their first house: The median age of a first-time home buyer hit 40 in 2024.

But by the end of 2025, more homeowners had crossed over to the other side, taking on mortgages with rates of 6% or more.

The lock-in effect is now fading. Homeowners with mortgage rates in the 4% and 5% range have been among the first to give up their low rates, Mike Simonsen, chief economist at real-estate brokerage Compass COMP, told MarketWatch. The trend is trickling down to those with rates of 3% and under, he added. The upshot of the shift is that home sales could pick up as more people part with their rock-bottom interest rates.

“That means more homes for sale, it means less upward pressure on prices and more selection for buyers,” Simonsen said.

More homeowners having 6% mortgages will change how people think about their mortgage debt, too, Simonsen said, and as a result, they may be more flexible when it comes to moving.

For instance, if someone loses their job, they might feel less regret about giving up their house and mortgage if their rate is relatively high, Simonsen said. Homeowners with 6% rates have less to lose by selling, and that mental freedom could encourage more people to move across the country for a new job or to upgrade their house to accommodate an expanding family, he said.

“A 2.9% interest rate is great and all, but you can’t live inside an interest rate. You need a home that suits your needs,” Khazai said. He tells his clients to not get “so caught up on interest rates … and worry about the rate later.”

“You shouldn’t let your happiness be determined by an interest rate on a house that doesn’t work for you anymore,” he said. Even though housing payments theoretically go up when rates go up, “you find ways to make it work.”

Of course, it’s also true that even a drop of less than 1 percentage point in a mortgage rate can mean a monthly payment that’s hundreds of dollars lower. For example, with a 6.51% rate, the monthly payment on a 30-year mortgage on a $300,000 house is $1,899. At a 7.25% rate, it’s $2,047.

As of the first quarter of 2025, the average interest rate for a 30-year mortgage was 6.6%, up from 3.7% in the same period in 2020.

Housing inventory has already been rising sharply as the lock-in effect fades. Between January and mid-December last year, the number of active listings in the U.S. rose 23.2%, which is considered to be strong growth, according to a report by real-estate platform Realtor.com.

“Buyers have significantly more options than they did last year at this time,” the company noted.

(Realtor.com is operated by News Corp subsidiary Move Inc.; MarketWatch publisher Dow Jones is also a subsidiary of News Corp.)

A MarketWatch analysis of federal data also found that in the third quarter of 2025, there were more locked-in homeowners in states where housing is more expensive than in other parts of the country. The states with the highest share of homeowners who had a mortgage rate of under 3% as compared with over 6% were California, Hawaii and Utah.

Homeowners in pricey areas are still locked in because selling their current home and buying a comparable one could potentially double or even triple their monthly mortgage payment.

The average value of a home in California as of Nov. 30 was $754,000, according to real-estate platform Zillow Z.

California homeowners are also locked in by a decades-old property-tax rule, Simonsen noted. Due to the state’s Proposition 13 rule, homeowners who experience a jump in their home’s value don’t see a corresponding increase in property taxes, since assessed values are capped annually at 2%.

The property-tax rule in California essentially creates a second lock-in effect, Simonsen said, because “the longer you hold [the property], the better it is.” In other words, homeowners are incentivized to not sell their home and give up their tax rate, which remains low even as their home value skyrockets.

On the flip side, the share of homeowners willing to take on 6% mortgages was highest in Mississippi, Oklahoma and West Virginia, federal data show. Those are all states where housing is less expensive compared with other areas. The average home value in Mississippi was about $188,000, per Zillow.

Another possible reason that homeowners in states like Oklahoma and Mississippi have shifted away from lower-rate mortgages is that they’re giving up on owning a home altogether as other homeownership costs, like insurance, have increased dramatically, Simonsen said.

Home-insurance costs in Mississippi were expected to go up 8% by the end of 2025, to about $5,200, according to a report by Insurify. “Coastal counties within Mississippi have historically paid about twice as much as inland counties for insurance due to hurricane risk,” the company noted.

The statistics above represent only a little more than half of the U.S. housing market. A significant chunk of homeowners don’t even have a mortgage: About 40% of homes in the U.S. are owned free and clear, according to analysis of Census Bureau data by Torsten Slok, chief economist at Apollo. That’s up from 33% in 2010.

For many of these homeowners, the lock-in effect doesn’t hold them back from selling their home, because they’re not paying a mortgage on the property.