Across Australia, something unusual is happening. Despite steady buyer demand, new listings remain tight, and many homeowners are staying put.
Welcome to the 'lock-in effect', a growing trend reshaping the real estate landscape in 2025. With interest rates holding steady well above the ultra-low levels of 2020–2021, many Australians who secured cheap fixed-rate loans during the pandemic are hesitant to sell and re-enter the market at today's higher rates.
The result? Fewer homes on the market, upward pressure on prices, and strategic opportunities for those ready to move.
What Is the Lock-In Effect?
The lock-in effect refers to the phenomenon where existing homeowners hold onto their current mortgage and property because selling would mean taking on a new loan at a significantly higher interest rate.
For example, a homeowner who locked in a 2% fixed rate in 2021 may now face a variable rate closer to 6%. Even if they want to upsize or relocate, the financial trade-off often feels too steep.
This has created a ripple effect across the market:
Lower stock levels in many capital cities
Delayed decision-making from would-be sellers
Increased competition for quality homes
A noticeable shift in property strategies
Who's Affected and How?
Homeowners
Rather than relocating, many homeowners are choosing to renovate – adding extensions, updating kitchens, or creating more flexible spaces. Others are holding off entirely, waiting to see if rates drop before making a move.
Buyers
While the RBA's pause on further hikes has helped stabilise buyer confidence, reduced stock is fuelling fierce competition, especially in lifestyle suburbs, school catchments, and well-connected areas. Buyers are acting fast, often stretching budgets or compromising on their wishlists.
Investors
Investor activity varies by region. In Sydney and Melbourne, some are still sitting on the sidelines due to serviceability constraints. However, in markets like Perth and Adelaide, where rental yields are rising and vacancy rates are tight, some investors are re-entering to take advantage of favourable conditions.
Market Impacts in 2025
The lock-in effect is contributing to a property paradox:
Even with affordability pressures, home values in many areas are holding firm or climbing, driven by limited supply and emotionally motivated buyers.
According to CoreLogic data from April 2025:
Listing volumes remain well below average in Sydney, Melbourne, and Brisbane
Time on market is decreasing, with well-priced homes attracting quick offers
Buyer activity is strongest in suburbs with lifestyle appeal, transport access, and quality schools
In this environment, sellers who do choose to list are finding themselves in a stronger-than-expected position.
What Sellers Should Consider Right Now
If you're thinking about selling in 2025, here's what to keep in mind:
Low stock = less competition
Buyer demand remains strong in high-appeal suburbs
Many buyers are emotionally driven – seeking space, lifestyle, or school zones
Well-presented homes are still achieving premium prices
That said, timing and preparation matter. Understanding your equity, refinancing options, and how your current mortgage compares to the market is essential to making a smart next move.
Ride the Shift, Don't Resist It
The lock-in effect might be slowing the pace of change for some, but for those willing and able to act, it's creating a rare window of opportunity. In a tight market, standing out is easier, and selling well is still very achievable.
Unsure whether to stay, sell, or refinance?
Speak to your local Century 21 agent for tailored advice, property appraisals, and expert support in navigating today's market with confidence.