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Owners with locked-in rates have little incentive to trade to anything else. You can't take the mortgage with you, so selling and then even buying a smaller house is going to lead to a higher payment in most cases.

What you will see is a lot more rental houses. When a lot of people move, they will just keep the old house and rent it out, because a huge portion of the value in the house is the mortgage itself.

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> You can't take the mortgage with you

One wonders perhaps, why is that exactly? Why can't you trade one bit of collateral for another similar bit of collateral?

You owe $300k backed by a $700k house and you want to swap that for a $500k house, why should the note holder be able to call in the loan when you do that?

Doesn’t the bank have the right to refuse to grant a mortgage in the first place, depending on the asset? It’s not like you tell them you’re buying a house worth x and they give you a mortgage for 0.8x, right?

Banks are heavily regulated and aren't loaning out their own money.

Because you no longer own the asset that is the collateral for the loan.

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