How High Mortgage Rates Are Affecting Employee Relocation

High mortgage rates are creating a measurable barrier to employee mobility.

For homeowners who secured historically low mortgage rates, accepting a position that requires relocation can mean giving up that rate and financing a new home at a significantly higher cost. Research now indicates that the difference affects not only housing decisions but also whether people move for employment opportunities.

For employers relying on relocation to recruit and deploy talent, that creates a direct workforce challenge. An attractive career opportunity may become considerably less attractive when accepting it also means taking on a significantly higher housing payment. Housing costs have become part of the mobility equation.

Why Mortgage Rates Are Affecting Employee Mobility

The economic effect is known as mortgage lock-in.

Homeowners with low fixed mortgage rates retain that financial advantage as long as they remain in their homes. Selling to relocate generally means replacing the existing mortgage with financing at current rates.

That creates a financial cost associated specifically with the employee’s relocation.

Research from the Federal Reserve has also documented the effect. Its analysis found that mortgage rate lock-in accounted for a significant portion of the decline in mortgage borrower mobility following the sharp increase in interest rates.

For an employee considering relocation, the decision may therefore extend well beyond salary, moving expenses, and the cost of the destination. The value of the mortgage being left behind can become part of the calculation.

What This Means for Employers

Relocation programs have traditionally addressed many of the major expenses associated with moving an employee, including household goods, temporary housing, home sale assistance, home purchase costs, travel expenses, and tax assistance.

The current housing market introduces a different question:

Does the relocation package adequately address the financial impact of giving up an existing low mortgage rate?

That question can be particularly important when recruiting or transferring homeowners.

An employee may be interested in the opportunity and willing to move, yet face a substantial increase in monthly housing costs at the destination. That can influence relocation acceptance, destination housing decisions, and the overall value employees place on the relocation package.

For employers, the issue is not simply whether mortgage rates are high. It is whether housing costs are creating a barrier to moving the talent the organization needs.

Relocation Policies May Need Another Look

There is no single solution appropriate for every organization or employee population.

Instead, employers can evaluate whether their current relocation policies provide enough flexibility to address housing-related barriers when they arise.

Depending on program objectives and employee eligibility, considerations may include:

 

Mortgage interest differential assistance is not a new concept. It is designed to offset part of the difference between an employee’s previous mortgage rate and the rate associated with financing a new residence.

What has changed is the market environment in which employers are evaluating these benefits.

Look at the Entire Homeowner Relocation Experience

Mortgage rates should not be evaluated in isolation.

A relocating homeowner may simultaneously be navigating the sale of an existing home, destination home prices, closing costs, taxes, temporary housing, and a substantially different financing environment.

The appropriate response may therefore involve more than one relocation benefit.

For some employees, home sale support may be the primary concern. For others, purchasing immediately at the destination may not make financial sense, making temporary housing or rental assistance more valuable. In other situations, the difference in mortgage rates itself may be the largest obstacle.

Understanding where the financial pressure exists allows employers to evaluate benefits against the actual barriers employees face.

Is Your Relocation Policy Keeping Pace With the Housing Market?

Relocation policies designed for a different housing and interest-rate environment may not address every challenge employees face today.

That does not necessarily mean employers need to increase benefits across every relocation tier. It does mean that housing conditions should be part of ongoing policy evaluation and benchmarking.

When an organization needs an employee to relocate, the package should support the business objective behind the move while recognizing the financial realities influencing the employee’s decision.

Signature Relocation works with organizations to evaluate relocation policies, benchmark benefits, and manage homeowner relocation programs based on workforce needs and program objectives.

As mortgage rates continue to influence mobility, understanding where relocation policies remove barriers and where gaps remain can help employers make more informed decisions about moving talent.

Frequently Asked Questions

How do high mortgage rates affect employee relocation?

Higher mortgage rates can increase the cost of purchasing a home after relocation, particularly when an employee must give up an existing mortgage with a substantially lower rate. Research indicates that this mortgage rate lock-in effect can reduce household mobility and responsiveness to employment opportunities requiring a move.

What is mortgage lock-in?

Mortgage lock-in occurs when homeowners have a financial incentive to remain in their existing homes because their current mortgage rates are substantially lower than rates available for a new mortgage.

What is mortgage interest differential assistance?

Mortgage interest differential assistance is a relocation benefit designed to offset some of the difference between an employee’s existing mortgage interest rate and the rate associated with a new residence.

Can employers provide mortgage assistance for relocating employees?

Employers can structure relocation programs to include various forms of mortgage or home purchase assistance depending on program design, employee eligibility and business objectives.

What relocation benefits can help relocating homeowners?

Depending on the relocation policy, homeowner benefits may include home sale assistance, Buyer Value Option home sale programs, mortgage-related assistance, assistance with eligible home purchases and closing costs, and temporary housing.

About Signature Relocation

For more than 28 years, Signature Relocation has provided end-to-end domestic and global relocation management services for organizations and their employees. As an independent, family-owned relocation management company, Signature provides policy development and benchmarking, homeowner and renter services, destination support, temporary housing, global mobility services, and relocation program management.

Technology provides visibility while our people provide expertise and accessibility, with direct access to relocation professionals who know each client program and employee move. Our services are backed by a quality assurance guarantee, providing an additional level of accountability throughout the relocation process.

If Mortgage rates are creating barriers for your relocating employees, Signature Relocation can help you evaluate your current policy and identify solutions that better support today’s homeowners.

Signature Relocation | Family-Owned. Client-Focused. Always Personal.

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