> So if the mortgager wants to get rid of the mortgage so they can move,
The borrower wants to sell the house, so their main concern for the sale of their house is to earn enough from the sale to pay off the mortgage and be able to buy another house. In which case a higher new mortgage interest rate for the new house could be offset by lower house prices, but supply and demand have not recalibrated to that (yet).
But of course, selling a house is not between the mortgage borrower and mortgage lender, it is between the homeowner and the potential new mortgage borrower, so there is an additional party involved whose needs need to be met.
> and the mortgagee wants to get rid of the mortgage because it's worth only half of its par value, there should be a massive incentive for a fair deal to happen.
The lender can sell the mortgage debt anytime it does not want it (and probably has anyway).
The lender is currently deciding to lend to the government, at 4%, or an individual homeowner (or whatever others borrower). Of course, if the least risky entity is giving you 4%, then everyone else needs to give you more than 4%.
Interest rates from previously issued mortgages are not relevant in making the decision for which interest rate to lend at now.
The government wants to limit the increase in prices, including house prices, and this is part of the process. Whether or not it is worth the side effects, is of course, always up for debate.
On the contrary, increasing mortgage mobility should lower prices.
In most cases the mortgager is selling their old house and buying another, keeping the same supply/demand balance. But in some cases the mortgager is selling one house and building a new one, increasing supply and lowering prices.
In theory, but due to various issues such as labor costs, zoning laws, permitting costs, and agglomeration of economic opportunities, that may not be happening at a sufficient rate in a sufficient number of locales.
The Feds do not have much control over those parameters though, so they play with what they (politically) can.
The borrower wants to sell the house, so their main concern for the sale of their house is to earn enough from the sale to pay off the mortgage and be able to buy another house. In which case a higher new mortgage interest rate for the new house could be offset by lower house prices, but supply and demand have not recalibrated to that (yet).
But of course, selling a house is not between the mortgage borrower and mortgage lender, it is between the homeowner and the potential new mortgage borrower, so there is an additional party involved whose needs need to be met.
> and the mortgagee wants to get rid of the mortgage because it's worth only half of its par value, there should be a massive incentive for a fair deal to happen.
The lender can sell the mortgage debt anytime it does not want it (and probably has anyway).
The lender is currently deciding to lend to the government, at 4%, or an individual homeowner (or whatever others borrower). Of course, if the least risky entity is giving you 4%, then everyone else needs to give you more than 4%.
Interest rates from previously issued mortgages are not relevant in making the decision for which interest rate to lend at now.