When they bought the two-bedroom duplex three years ago, in March 2020, the price was fair and the mortgage rate was a good 3.25 per cent.

Today, however, the married couple have clearly outgrown their initial home, and with a new baby girl joining their now four-year-old boy, Short knows they will soon need a bigger place.

"It's basically doable," she says. Many nights, however, she finds herself browsing real estate listings. While she often saw houses with lots of potential, one thing held her back: if they moved, they would have to get a new mortgage with an interest rate about twice as high.

"We're kicking ourselves for the interest rates we're getting," says Short. But they will eventually have to make the hard choice: sacrifice their interest rate or stay in a house that is no longer comfortable for their growing family.

"I can make it work for a few more years," says Short." Stephen and I talk about this almost every day. Both of my neighbours are having babies in the fall, so everyone is thinking about it."

The couple's plight is so common it's been called "hate my house, love my mortgage" syndrome. According to the Urban Institute, this widespread malady stems from the fact that historically low mortgage rates in the 3 per cent range have more than doubled in the past year, soaring to multi-decade highs.

This sudden spike has thrown a wrench into the normal cycle of people buying initial homes and then eventually trading them in. Since this will involve getting a new mortgage at a higher rate, many homeowners are turning to stay put, even if their home doesn't suit their current needs.

"This makes the process of upgrading in the current market very difficult," says Danielle Hale, chief economist at Realtor.com®." These are tough choices. It's a difficult time for homeowners to make plans."

In fact, a recent Goldman Sachs report found that 99 per cent of borrowers had mortgage rates below 6 per cent. Of those, 28 per cent grabbed rates of 3 per cent or less. data from Realtor.com shows that combined with rising home prices, the cost of buying a home today is as much as 50 per cent higher than it was a year ago.

"The shock of trying to borrow the same amount of money and paying for it is quite significant," Hale said." And when you consider how much prices have gone up, that's an additional shock."

"The biggest gap in the market right now is the buyers who are moving," says Drew Coleman, founder of Opt Real Estate in Portland, Oregon." They're the ones who are stuck and don't want to give up on home prices, which is creating a shortage of inventory."

Coleman estimates that only about a third of all the people who come to him actually decide to sell their homes. He sometimes wishes people would take the opportunity to go against the grain - sell first and then buy in the current market, where there is likely to be less competition and prices are a little off the peak. After all, they can always refinance at a later date when interest rates are lower.

"We never tell people to take payments they can't afford," he points out." But what we are saying is that you have an opportunity here."

For homeowners looking to move, facing higher housing payments at a time when inflation is still raising the price of many things can seem particularly daunting, leaving many feeling financially unstable.

"A lot of my clients think, 'Whatever I do, it really feels risky. It feels like there's no good solution out there.' I feel the same way." says Nikki Kam, a real estate agent with Flyhomes in Seattle. To help, she tries to distill her personal situation into very specific priorities. Is a bigger house, a better school district, or more green space worth all that extra money?

"As mortgage rates go up," she says, "with the same monthly payment, they have less buying power." So, can we find something they like in that price range? Can they tolerate, say, a longer commute, or will they decide, 'We can wait'?"

At the end of the day, it's important to note that in many ways, people who own homes and have historically low mortgage rates are really well off. Short said she appreciated that her question was a "first world problem".

"We're not going to die here," she said." We just have to be creative."