Several recent policy proposals have aimed to reinvigorate the housing market. One of the more interesting new proposals would allow homeowners to carry their existing mortgage to a new home. Mortgage portability, as it’s called, provides the option to someone with an existing mortgage, possibly with a low mortgage rate, to transfer any remaining mortgage balance at the fixed rate to a new primary residence.
The proposal targets the lock-in effect caused by homeowners with low mortgage rates reluctant to move to a new home, since doing so would likely require a new mortgage at today’s higher rate. Mortgage portability would allow them to keep their existing mortgage at its fixed rate and carry the remaining debt to the new home.
Some in favor of the policy argue that this would grease the wheels of the housing market. While that could be the case, the policy could unintentionally drive mortgage rates higher for first-time homebuyers looking to enter the market.
The key is in the expected duration of the mortgage. Every year, large shares of homeowners prepay their mortgage for a variety of reasons—e.g., moving to a new home or voluntary debt reduction. For agency-backed mortgages, mortgage default results in an insurance payment to the lender, effectively making default another form of prepayment. Because of prepayment, the average duration of a 30-year mortgage loan is around 10 years, which, in turn, is why mortgage rates tend to follow the 10-year Treasury yield.
Mortgage portability would likely increase the expected duration of a mortgage loan, since households with low interest rates would likely finance a portion of new homes with existing mortgages. So—why would that impact mortgage rates? The key is in the Treasury yield curve.
Notes: This graph shows the market yield on U.S. Treasury debt at different maturities, as of January 23, 2026.
Source:Â U.S. Department of the Treasury, accessed via FRED.
A basic approach to determining loan interest rates over various durations involves taking the Treasury yield (interest rate) at that duration and adding additional interest to compensate the lender for any specific risk. The Treasury yield curve (Figure 1) highlights how a jump in expected duration past 10 years increases the underlying interest rate. This jump exists for several reasons—inflation risk, increased uncertainty, or heightened competition for long-term debt. Regardless, it shows how assets with longer duration would experience higher interest rates. This explains why mortgage portability would increase mortgage rates—because of the increase in the expected duration of the loan.
In just about every policy, there are those who benefit more than others. In this case, those with existing mortgages at low rates would benefit because they would gain portability on existing loans. The policy, however, would likely raise rates for first-time homebuyers, contributing to their affordability issues. So—while the policy could achieve the goal of prompting housing market activity, it would likely come at the cost of higher mortgage rates.
Views expressed on The 338 are those of the authors and do not imply endorsement by the Texas Real Estate Research Center, Division of Research, or Texas A&M University.
