Repurchase Mortgages to End Lock‑In

Allowing borrowers to extinguish fixed‑rate mortgages by buying the bond backing their loan at market value (as in Denmark) removes the incentive to stay put when interest rates rise. Empirical evidence and a calibrated model suggest households buy back mortgages when prices fall and that repurchase options substantially reduce rate‑driven immobility while increasing average mortgage rates only modestly (≈18 basis points in the authors’ calibration). — Adopting a market‑repurchase option in U.S. mortgages could restore household mobility, improve labor market responsiveness, and deliver net social gains with limited cost to lenders.