Mortgage Lock-In, Mobility, and Labor Reallocation

78 Pages Posted: 7 Apr 2023 Last revised: 9 Nov 2023

See all articles by Julia Fonseca

Julia Fonseca

University of Illinois at Urbana-Champaign

Lu Liu

University of Pennsylvania - Finance Department

Date Written: March 24, 2023


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 mortgage rate deltas (Δr), measured as the difference between the mortgage rate locked in at origination and the current market rate, reduces moving rates by 0.68 p.p, or 9%. We find that this relationship is nonlinear: once Δr is high enough, households’ alternative of refinancing without moving becomes attractive such that moving probabilities no longer depend on Δr. Lastly, we find that mortgage lock-in attenuates household responsiveness to shocks to nearby employment opportunities that require moving, measured as wage growth in counties within a 50 to 150-mile ring and instrumented with a shift-share instrument. The responsiveness of moving rates to wage growth is nearly three times as large for households who are less locked in (above-median Δr) than for those who are more locked in. We provide causal estimates of mortgage lock-in effects, highlighting unintended consequences of monetary tightening with long-term fixed-rate mortgages on mobility and labor markets.

Keywords: mortgages, housing lock-in, mobility, labor reallocation, monetary tightening

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

Suggested Citation

Fonseca, Julia and Liu, Lu, Mortgage Lock-In, Mobility, and Labor Reallocation (March 24, 2023). Jacobs Levy Equity Management Center for Quantitative Financial Research Paper, Available at SSRN: or

Julia Fonseca

University of Illinois at Urbana-Champaign ( email )

Lu Liu (Contact Author)

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

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