Portable Mortgages Could Break the Housing Market Lock-In—but Do Little for Affordability

More than half of U.S. mortgage holders have rates of 4% or lower, and 80% have rates under 6%, according to the latest data from Realtor.com®. That’s created a powerful lock-in effect, leaving millions reluctant to move and give up their once-in-a-generation rates. Now, the Federal Housing Finance Agency is weighing a radical fix: a new loan that would allow homeowners to carry those low rates with them to their next home.

Bill Pulte, the FHFA director, said the administration is “actively evaluating portable mortgages,” in a post on X. The announcement came just days after President Donald Trump floated the idea for 50-year mortgages, in what was widely considered a flop by industry experts and consumers alike. 

Both ideas aim to address the same problem: a housing market frozen by affordability pressures and a lack of mobility. But portability, if adopted, would likely only address one side of that equation.

“In theory, the rate gap (the difference between borrowers’ own rate vs the current market rate) is a notable drag on mobility, so portable mortgages might unlock some activity and free up inventory,” explains Jake Krimmel, senior economist at Realtor.com. 

“But empirical work shows the lock-in effect explains only about half of the recent decline in mobility, so portability is unlikely to bring sales fully back to normal levels,” he adds. “And the benefits would be highly selective: Only current mortgage holders with low rates would gain; renters and homeowners without a mortgage would still face today’s rates.”

First-time homebuyers remain one of the most embattled segments of the housing market. Up against the headwinds of high prices and high mortgage rates, the median age of first-time buyers in the U.S. recently hit a record high of 40-years old.

There are also concerns that portability could disrupt one of the core engines of the U.S. housing system: mortgage-backed securities. But even beyond the financial-system risks, the bigger obstacle remains unchanged: affordability.

“Put simply, portability isn’t compatible with the architecture of U.S. mortgage finance, and even if it were, it wouldn’t fix the broader affordability problems facing the housing market today,” says Krimmel.

How do portable mortgages work?

When you buy a home, you also buy a mortgage. And while selling your home usually means saying goodbye to that loan and the rates and terms attached, a portable mortgage allows you to move with it.

It’s essentially the opposite of an assumable mortgage. With an assumable loan, a buyer steps into the seller’s mortgage. With a portable mortgage, the seller carries their mortgage to the next property.

“Pulte’s proposal is a brute-force attempt to solve the lock-in effect: If homeowners aren’t moving because they don’t want to give up a 3% mortgage for a 6% one, why not just let them carry that low rate to their next home?” explains Krimmel.

While simple in theory, it gets more complicated in practice. Suppose you have a $500,000 mortgage at a 4% interest rate and have built $300,000 in equity. If you buy a $400,000 home, you could transfer your existing loan to the new property and keep your 4% rate intact.

But if you’re purchasing a more expensive home—say, $750,000—your portable mortgage would only cover the remaining balance of your original loan. You’d have to make up the $250,000 difference with cash or a second loan, likely at higher rates.

Although portable mortgages don’t exist in the U.S., they’re common in countries like the U.K. and Canada. One reason they work there is that their fixed-rate periods are much shorter—typically three or five years—so homeowners are incentivized to regularly renegotiate their loans.

In the U.S., where most borrowers lock in 15- or 30-year fixed rates, the knock-on effects of portability are far more complex. If homeowners could carry a 30-year loan from house to house for decades, critics warn they might never need to refinance or take out a new loan at all, drastically reducing loan volume and disrupting the mortgage-backed securities market that underpins much of the system.

That, in turn, could ultimately make it harder and more expensive to borrow.

“Prepayment is required in the event of a move by standard language in existing mortgage contracts that is used to support the system of securitization that makes it easier for investors to funnel money into mortgage lending, a process that ultimately helps to lower mortgage rates for borrowers,” says Krimmel.

Who would portability help and hurt?

While there’s a clear upside to portable mortgages for homeowners with low interest rates, there's little benefit to everyone else.

“A portable mortgage can be a real boon to a certain segment of homeowners,” says Omer Reiner, a licensed agent and president of FL Cash Home Buyers. “All things being equal in the homeowner’s financial situation, such as income and a credit score that has stayed the same or improved, moving up would be far more beneficial with a portable mortgage.”

Krimmel agrees: “There’s no doubt that, if magically implemented overnight, the portable mortgage would enable many families to move and thereby free up some more inventory as a result. And to be clear, getting the housing market more liquid again and letting families reoptimize their housing choices is no bad thing."

But all magic comes with a price, and first-time homebuyers and the mortgages industry more broadly, are likely to be the first to pay.

For one, Krimmel expects that the favorable financing of some would push home prices up for all by increasing buying power, much like what happened during the pandemic housing boom.

“Meanwhile, current renters or homeowners without a mortgage would still face today’s high rates—only with list prices higher than they are now due to the influx of cheap-financed demand,” he adds.

Mortgage-backed securities (MBS) would likely be hit hard, too. This financing tool allows banks to pool together groups of mortgages, then sell shares of that pool to investors. Banks then use that money to fund more mortgages.

“If a mortgage became portable, the collateral (and therefore the risk profile of the entire pool) could change midstream. That breaks the current models of securitization,” says Krimmel.

And while investors and securitizers could presumably find workarounds, Krimmel says that higher risk typically carries higher interest rates.  If borrowers can carry a single loan with a low rate far into the future, fewer loans would reset, fewer mortgages would be refinanced, and fewer new loans would enter the system.

“Investors would demand higher compensation for that extension risk, pushing mortgage rates higher, first abruptly and then structurally through wider spreads over the 10-year Treasury," ” Krimmel says. "On top of that, origination and servicing would become far more complex because the lien, escrow, taxes, and title obligations all depend on the specific property."

How does it compare to other proposed solutions?

Portable mortgages aren’t the only idea being floated to unfreeze the housing market. Just days before the FHFA signaled its interest in portability, President Trump pitched a 50-year mortgage. But that proposal has been met with deep skepticism from economists, housing advocates, and even many industry professionals who argue it would do far more to prop up lenders than help buyers.

“I don’t like 50-year mortgages as the solution to the housing affordability crisis,” Representative Marjorie Taylor Greene posted on X. “It will ultimately reward the banks, mortgage lenders and home builders while people pay far more in interest over time and die before they ever pay off their home.”

Real estate agents echo that concern.

“With a 50-year mortgage, you are looking at paying a lot more over the life of the loan in interest. Plus there is a good chance your mortgage might outlive you, leaving a financial quandary for your heirs to sort,” says Reiner.

Mortgage broker Carlos Scarpero goes a step further, arguing that the proposal could actually worsen the very problem it’s meant to solve. “Personally I'm not a fan of the proposal,” he says. “It will just cause people to buy more and blow up the housing bubble even further. Then we will be back to where we started. But it will be on longer-term loans.”

Both the 50-year mortgage and portability aim to ease pressure in a market strained by high rates and high prices. But neither proposal addresses the root issue: Homes remain far too expensive for the typical buyer, and rates remain far too high for renters and first-timers to get a foothold. Whether the loan lasts 30 years or 50—or can be carried from house to house—those deeper affordability challenges remain unchanged.