Why the housing market in America is stuck – and what the rest of the world can teach us
The scale of the lock-in problem is amazing. According to the Federal Housing Finance Agency, almost two -thirds of the American homeowners have mortgages below 4%. With the current rates that fluctuate almost 7%, nowadays selling a house often means to act a historically low payment for an almost double of the size. It is not surprising that homeowners do not cry. The inventory has collapsed. Existing home sales has a hit multi-decennium lows. The prices remain stubborn, even if the loan costs rise. What was once a dynamic, mobile housing economy is now in place.
The effects wrinkle far beyond the homeowner. Banks and credit associations – many of which depend on mortgage activity to increase lending, collect deposits and generate income from the reimbursements – are confronted with a long -term drought. Mortgage originations have deposited a cliff. Refinancing has almost disappeared. Service portfolios are hidden with long-dedicated loans with low interest rates that make up balance sheets. For many regional lenders, the lock-in effect is not only a housing problem it is a systemic business risk.
And for first home buyers, the photo is even gloomy. With so few houses that hit the market, they are forced to compete for a shrinking piece of stock, often at bloated prices. Unlike existing owners, these buyers do not have a low loan to protect, no equity for leverage and no fallback. They try to break into a market that actively works against them – where affordability shrinks does not improve.
Although the US is struggling with this growing crisis, other countries have built systems that avoid this kind of freezing. Denmark offers one of the most fascinating models. There, mortgages are directly linked to the bond market, so that homeowners can pay their loans at market value – effectively buy their debt without a fine. This structure provides borrowers flexibility while maintaining liquidity and transparency for lenders and investors. Instead of being locked up in a loan, Danish homeowners can adapt to changing market conditions – keep the system liquid, even when the rates shift.
The model works – and the US knows. In 2018, the Federal Reserve Bank of New York carried out a detailed assessment of the Danish mortgage system, which emphasizes efficiency, resilience and potential as a reform blue pressure (link). The core insight: A well -designed financial product can serve both borrowers and lenders without creating systemic friction. By coordinating stimuli and tackling the capital markets, Denmark has nowhen stagnation the American system moving:
“Danish homeowners can buy back their mortgage from a covered bond at the prevailing market price. This function reduces mortgage lock effects during rising tariff environments.”
So why didn’t the US improve? Partial slowness, partial complexity – but largely because innovation in financial products lags behind the needs of a changing economy. The 30-year-old mortgage with fixed interest rates is a cornerstone of American home financing, but it was not built for flexibility. It was built for stability. In the current environment, that design will be liability.
It’s time to look outside – and ahead. Whether it is about the market for the Denmark in advance or the Israel model of portable mortgages (where borrowers can wear their loan to a new real estate), international examples show that Smart Design can unlock frozen markets. These are not theoretical ideas are functioning systems with real-world track records. Importing and adjusting these models can help the US escape from its self -imposed freezing.
The mortgage locking crisis is not just a rate problem. It is a design problem. And design problems demand design solutions. Financial product innovation – carefully adapted from proven worldwide models – can be the key to repairing movement, affordability and balance to the American housing market and financial institutions.
Jonathan Arad is co-founder and CEO of Takara, a business financing of the American mortgage by importing and adjusting
from abroad. This column does not necessarily reflect the opinion of the editorial department of Housingwire and the owners.
To contact the editor who is responsible for this piece: [email protected].
