The ubiquity of 30-year, fixed-rate mortgages has long made the U.S. housing finance system an outlier among peer economies like the United Kingdom, Australia and Canada where shorter-term, adjustable-rate products are more prevalent.
The 30-year home loan was first introduced in the U.S. by the Federal Housing Administration in the aftermath of the Great Depression and then gained traction in the post-World War II era.
Fixing low-cost financing over three decades has facilitated long-term homeownership for millions of borrowers and the accumulation of intergenerational wealth via asset appreciation, tax advantages, leveraged investing and equity accrual from forced savings.
“The 30-year fixed mortgage makes the U.S. housing market unique. It brings stability but it heavily anchors homeowners in place,” writes Thom Malone, principal economist at the real estate analytics firm Cotality, in a research brief published Tuesday.
Households have benefited over many decades from reduced payment volatility, locked into monthly payments that bring stability and predictability to household finances. Then the COVID-19 pandemic happened — and a glitch in the system took over.
“Instead of prices adjusting when demand drops, sellers hunker down and try to wait out the downturn,” added Malone. Long-term mortgage structures maintain stability at the cost of mobility, he says.
Over the past three years, the U.S. housing market has paid the price in lost sales. Mortgage rates are widely expected to remain near current levels in the low-6% range in 2026.
The Trump administration has floated the idea of creating 50-year mortgages that could accelerate mobility by reducing monthly payment burdens. Housing experts largely agree, however, that any short-term gains in mobility would be offset by long-term tradeoffs.
Where mortgages with shorter fixed terms roll into adjustable rates in housing markets like Canada’s or Australia’s, sellers in the U.S. have the flexibility to hold their properties through economic cycles, selling when advantageous.
The Federal Reserve lowered its benchmark borrowing rate to effectively 0% during the pandemic to prop up the economy, which plunged rates for 30-year fixed-rate mortgages into the 2% to 3% range.
Millions of homeowners refinanced their 30-year loans and millions of new purchase mortgages were originated at these low levels. As of the end of the second quarter of 2025, about 80% of mortgaged homeowners have a mortgage rate of 4% or lower.
However, homebuyer demand has plummeted since mid-2022, when the Federal Reserve began hiking interest rates to combat spiking inflation generated by the combination of pandemic-era stimulus and supply-chain disruptions.
Because mortgage rates spent 2023 near 8%, 2024 near 7% and 2025 above 6% — locking homeowners into their homes and home loans — the advantages of fixed rates and long payment terms have shackled the housing market in golden handcuffs.
“Owners feel limited by fixed rates they cannot replace,” Malone writes. “Transactions and people can only move when a seller values motion over preserving price.”
This lock-in effect has slowed the pace of home sales to 30-year lows over the past three years as the cost of homebuying has surged, fueled by rapid home-price gains and elevated mortgage rates. Home turnover rates are at their lowest levels in 25 years.
Economic indicators show that homebuyers and sellers spent much of 2025 in a sales standoff, one that looks to persist into 2026. Sellers flooded the market with listings, but buyers remained hesitant while the menu of options expanded.
Outside of stark purchase affordability barriers, rising costs of living, the longest U.S. government shutdown on record, and job market anxiety have weighed on prospective homebuyers. Caution has fueled a rise in stagnant listings, which has fueled price softening and outright declines in many markets around the country.
Sellers watching their pricing power evaporate are now pulling a different lever, delisting properties until demand rises. Many, as Malone points out, have the flexibility to do so — and the 30-year, fixed-rate mortgage to simultaneously thank and curse.
Though the choice for many is to preserve their low-rate mortgage and equity safety cushion, mortgage costs separate from principal and insurance have risen sharply in the past five years. Households are locked in their low rates, but also those rising costs.
“The U.S. system moves differently,” says Malone. “Sellers have the flexibility to operate at a slower pace, and that pace can create chokepoints that slow down the entire market.”
