How the Lock-In Effect Is Driving Demand for Home Improvement

The combination of rising mortgage rates, high home prices, and limited inventory has led to what is often referred to as the lock-in effect. Homeowners are staying put because selling their homes would mean giving up their low-interest rates. Since 2022, the average 30-year fixed rate has generally remained above 6%, while, according to ACHR, 80% of homeowners hold a rate below 6%.

Though interest rates are beginning to drop, homeowners are still choosing to stay in their homes and are expected to spend around $523 billion in home improvement and repairs by early 2027. When people remain in their aging homes, replacements are inevitable as systems wear down. The question is whether they can afford replacements, upgrades, or even repairs when that happens.

Where Financing for Home Improvement Comes into Play

Homeowners have many options to pay for home improvements. Some will pay with cash, a home equity loan, or a credit card. There are pros and cons to each of these options.

If a homeowner is renovating a kitchen or replacing a roof, they might have the time to visit a bank, fill out paperwork, and wait weeks for a HELOC or personal loan. However, if it’s the middle of summer and the air conditioning breaks down, the homeowner needs a quicker solution.

That’s where offering financing can make a major difference for both the homeowner and contractor.

For homeowners, the option to make manageable monthly payments rather than paying the full amount up front can make an urgent, high-cost project more manageable. A quick application and decision process is especially valuable when the project needs to be done immediately, which is often the case with HVAC, plumbing, or electrical work.

Financing helps contractors remove the biggest barrier to closing a sale: sticker shock. When homeowners are upset or surprised by the total cost of a project, learning that they can make monthly payments can help ease a stressful situation and remove any hesitation.

Plus, when homeowners have payment flexibility, they may be more open to add-ons, a higher-efficiency system, or a more complete repair, rather than choosing the cheapest short-term fix.

Why HVAC Specifically Benefits from the Lock-in Effect

When moving is off the table, any money that would have gone toward a new house gets redirected into the current one. The lock-in effect keeps people investing in their existing properties, creating demand for comfort improvements and energy-efficiency upgrades.

HVAC is especially well-positioned for home improvement because it affects daily life in a way many other home improvements do not. Homeowners might be able to delay cosmetic upgrades, but heating and cooling directly affect a home’s comfort and livability.

That matters even more now that the nation’s houses continue to age. The median American home is now over 40 years old, which means many homeowners are living with older systems that may be less efficient and less reliable.

As more people stay in their homes longer, they are not as focused on making improvements for resale value; instead, they are investing in upgrades that make the home work better for them today and in the future. This creates an opportunity for HVAC contractors to position system replacements and upgrades around long-term comfort, efficiency, and overall home health. Indoor air quality is becoming a bigger part of that conversation. As Contracting Business notes, IAQ is no longer just an add-on. It is increasingly part of how homeowners think about a healthier home environment: cleaner air, fewer allergens, and greater protection from pollutants.

Financing makes it easier for homeowners to choose these HVAC upgrades. Even when they understand the value of a new system or an IAQ product, the upfront cost can be a barrier. Monthly payment options give them a way to invest in their home without delaying the project or choosing the cheapest fix because they don’t have to pay the full amount at once.

Financing for Repairs

Financing for home improvement isn’t just for system replacements. In today’s uncertain economy, homeowners are keeping a close watch on their spending. A recent DuraPlas survey reported by ACHR found that 50% of Americans skipped their HVAC maintenance to save money heading into the summer, even when homeowners have noticed strain in their cooling systems. As budgets tighten, more homeowners are looking for ways to extend the life of their existing systems.

That is helping drive today’s repair-first market. As they stay in their homes longer and try to continue using existing systems, many homeowners are choosing repair over replacement whenever possible. FTL Finance has seen this shift firsthand, with service-related loan applications growing much faster than equipment applications in recent years.

That trend lines up with broader industry data. According to a Housecall Pro survey covered by Contracting Business, 79% of homeowners expect to repair or replace at least one major home system in 2026, and 20% specifically plan HVAC work. The same report found that rising costs are causing many homeowners to delay projects, seek additional quotes, or wait until a smaller issue becomes more serious.

That is where financing can be especially valuable. Even when a repair costs less than a full system replacement, it can still be an unexpected cost that strains budgets. Financing gives homeowners a way to move forward with necessary work without delaying service or resorting to a short-term fix that could prove more expensive later.

For contractors, financing makes repair conversations easier because it gives customers more flexibility. But financing conversations work best when they are presented as part of a larger solution, not as a standalone sales tool. That is where solution selling comes into the picture.

Solution Selling in Home Improvement

Solution selling is especially relevant in home improvement because homeowners aren’t just buying a product or service. They are trying to solve a problem in their home. As Salesforce explains, solution selling focuses on understanding the customer’s needs and pain points, then recommending the right solution rather than simply pushing a product.

Learning what your homeowner needs is crucial to the customer experience, but they may not even know what they need. That’s why it’s important for you to ask the right questions; dig in to find the root cause of their issues, discover your customer’s priorities, and provide options for the best path forward.

This might require a shift from “this is what this system costs” to “here is how this option will solve the problem you’re dealing with.” By asking the right questions and listening closely, you can recommend solutions that fit the homeowner’s needs and budget, which makes them feel more in control of the decision and less overwhelmed by the cost. Financing supports this approach by making it easier for the homeowner to move forward with one of the recommended solutions.

Offer Financing to Every Homeowner

The bottom line - and good news - is that the lock-in effect isn’t keeping homeowners from spending money. In fact, they are spending more on home improvements because they intend to stay in their homes longer and need to maintain their homes as they age. This creates an opportunity for contractors to provide more guidance and value to their customers. When homeowners plan to stay in their home, they are more likely to invest in repairs, replacement, and upgrades that make their homes more comfortable and functional. They are more willing to make long-term investments in their home.

By offering financing early and consistently, contractors can help homeowners move forward with the work they need now and choose a payment option that fits their budget.