Mortgage Lock-In, Mobility, and Labor Reallocation

We study the impact of rising mortgage rates on mobility and labor reallocation. Using individual-level credit record data and variation in the timing of mortgage origination, we show that a 1 p.p. decline in the difference between mortgage rates locked in at origination and current rates reduces moving by 9% overall and 16% between 2022-2024, and this relationship is asymmetric. Mortgage lock-in also dampens flows in and out of self-employment and the responsiveness to shocks to nearby employment opportunities that require moving, measured as wage growth within a 50 to 150-mile ring and instrumented with a shift-share instrument.

Keywords: Mortgages, housing lock-in, mobility, labor reallocation, monetary tightening JEL Codes: G21, G51, J62, R30, E58

JEL Classification: G21, G51, J62, R30, E58

Suggested Citation: Suggested Citation

Fonseca, Julia and Liu, Lu, Mortgage Lock-In, Mobility, and Labor Reallocation (March 24, 2023). Journal of Finance, Forthcoming, Jacobs Levy Equity Management Center for Quantitative Financial Research Paper, Available at SSRN: https://ssrn.com/abstract=4399613 or http://dx.doi.org/10.2139/ssrn.4399613