Trump admin eyes ‘portable mortgages’ to jumpstart housing market
The low mortgages homeowners cashed in on during the COVID-19 pandemic gave way to the term “golden handcuffs,” meaning it’s a great situation to have, but deters the owner from moving. The Trump Administration is exploring ways to unlock that part of America’s sluggish housing market.
The U.S. Director of Federal Housing, Bill Pulte, said Wednesday the federal government is “actively evaluating portable mortgages,” in a post on X.
A portable mortgage lets you transfer your existing home loan, with its terms, interest rate and conditions, from your current property to a new one when you move, according to a report from Realtor.com.
When you buy a home, your mortgage is tied to that specific property. When you sell your home, you usually have to pay off that mortgage, losing the interest rate and terms you had. A portable mortgage lets you take your existing mortgage with its original terms and interest rate to your new home when you move so you don’t lose those benefits.
“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?” Jake Krimmel, senior economist at Realtor.com, explained in the report.
If you buy a new home that costs less than or close to your original mortgage amount, you can transfer your existing mortgage to the new home and keep your favorable interest rate. If you buy a more expensive home, the portable mortgage will only cover the remaining balance of your original loan, and you will need to cover the difference with either cash or a new loan, which usually carries a higher interest rate than the favorable rate of your portable mortgage.
Portability’s impact on the housing market
The housing market is stuck because homes are too expensive and people aren’t moving as much as they used to. Mortgage portability helps some people with a low-rate mortgage to move more easily, but it doesn’t solve the problem of fewer people moving, and it doesn’t help renters or mortgage-free homeowners facing today’s higher rates.
“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,” Krimmel said.
First-time homebuyers face challenges in today’s housing market. Because home prices and mortgage interest rates are both very high, it’s harder for new buyers to afford a home. As a result, the average age of people buying their first home in the U.S. increased, recently reaching a record high age of 40.
Concerns and limitations
According to Realtor.com, some worry that mortgage portability might interfere with mortgage-backed securities, which are financial products made by bundling many mortgages together and selling them to investors. Portability could complicate how these securities work.
However, the main problem continues to be affordability. Homes and mortgages are too expensive for many people, and that issue won’t be solved just by making mortgages portable.
“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,” Krimmel said.
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Ella Rae Greene, Editor In Chief
