The Mortgage Lock-In Puzzle
Key Takeaways
- Mortgage lock‑in is limiting mobility, with many homeowners unable or unwilling to move despite changing needs
- Reduced housing supply is worsening affordability and raising barriers for first‑time buyers
- Constrained mobility is weighing on labor markets and broader economic growth
- Innovative mortgage solutions could unlock activity—but must balance borrower value, lender incentives, and complexity
In this episode of the Citi Institute Podcast, host Alex Miller is joined by Paul Goody, Head of Balance Sheet Strategy and In-Business Risk, Treasury, Citi and Karen Dynan, Professor of the Practice of Economics at Harvard University.
They explore how the “mortgage lock‑in” effect—where homeowners with low fixed‑rate mortgages are financially disincentivized to move when market rates are much higher—has become a widespread drag on U.S. household mobility, housing affordability, and economic opportunity.
Paul explains how rising rates have left banks holding large portfolios of low‑coupon mortgages while many borrowers feel “golden handcuffs,” unable to relocate for family, job, or schooling reasons without sharply higher payments.
Karen highlights how constrained geographic mobility can limit access to better jobs and schools, while reduced turnover contributes to thinner housing markets, sharp post‑pandemic price increases, and worsening affordability that particularly harms younger and less affluent would‑be first‑time buyers.
Both speakers stress the need to design any new mortgage products so they are fair, transparent, and genuinely beneficial to households, drawing lessons from “affordable” mortgage innovations before the financial crisis that ultimately produced poor outcomes for many borrowers.
Citigroup (“Citi”) and the Peterson Institute for International Economics (“PIIE”) are independent and are not affiliated with one another. Peterson Institute for International Economics (“PIIE”) works with Citi on a limited basis to provide speakers for events. The speakers’ views are their own and may not necessarily reflect the views of Citi or any of its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. The expressions of opinion arenot intended to be a forecast of future events or a guarantee of future results.
Karen Dynan, Professor of the Practice of Economics at Harvard University
Karen Dynan, nonresident senior fellow at the Peterson Institute since March 2017, is a professor of the practice in the Harvard University economics department. She served as assistant secretary for economic policy and chief economist at the US Department of the Treasury from 2014 to 2017, where she led analysis of economic conditions and development of policies to address the nation’s economic challenges. From 2009 to 2013, Dynan was vice president and codirector of the economic studies program at the Brookings Institution. Before that, she was on the staff of the Federal Reserve Board, leading work in macroeconomic forecasting, household finances, and the Fed’s response to the financial crisis.
Dynan has also served as a senior economist at the White House Council of Economic Advisers (2003–04) and as a visiting assistant professor at Johns Hopkins University (1998). Her current research focuses on fiscal and other types of macroeconomic policy, consumer behavior, and household finances. Dynan received her PhD in economics from Harvard University and her AB from Brown University.
Paul Goody, Head of Balance Sheet Strategy and In-Business Risk, Treasury, Citi
Paul Goody leads Balance Sheet Strategy and In-Business Risk for Citi’s Treasury. He is responsible for strategic and tactical enhancements to Citi's Balance Sheet driving both performance and resiliency, Corporate Insurance and overseeing Treasury's risk profile.
Paul has been with Citi for over 30 years in various capacities, including alternative investment product management, chief investment officer for multiple investment vehicles and asset management.
Paul holds a degree in Mathematics from Oxford University.
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