Mortgage rates trap couples in unhappy marriages

[UNITED STATES] As the calendar turns to 2025, many couples find themselves facing a difficult decision: whether to stay together or part ways. The first Monday after New Year's, dubbed "Divorce Monday," is traditionally the busiest day for family law attorneys. However, this year, high mortgage rates are creating an unexpected obstacle for couples considering divorce.

Divorce Monday, falling on January 6th in 2025, marks the beginning of what many family law practitioners consider "divorce season." This surge in divorce inquiries and filings is often attributed to couples who have decided to wait until after the holidays to separate, hoping to maintain a sense of normalcy for their families during the festive period.

Jessica Chapman of Chapman Family Law explains, "We do experience an increase in intakes this time of year especially. Firstly, a lot of people have this new year energy where they think, 'OK, new chapter, new year's resolutions, new version of me,' and for a lot of people that new version of their life might be one without their current partner."

The Economic Landscape of 2025

As couples contemplate divorce in early 2025, they face a unique economic environment. The job market remains strong, with wages rising faster than inflation. Many homeowners have seen their wealth increase due to rising real estate values and gains in investment accounts. However, one significant factor is complicating the divorce equation: high mortgage interest rates.

The Mortgage Rate Dilemma

Current mortgage rates are playing havoc with homeowners who want to split up. Many couples refinanced their homes a few years ago when interest rates were at historic lows. Now, they find themselves locked into mortgages with interest rates well below current market rates.

Bill Conerly, in his Forbes article, points out, "Recent statistics show 58% of mortgage value outstanding is at interest rates below four percent, with another 15% between four and five percent. For example, a typical mortgage at the end of 2020 was 2.7%."

This disparity between existing and current mortgage rates creates a significant financial barrier for couples considering divorce. Conerly provides a stark example: "On a loan balance of $400,000, that resulted in monthly payments of about $1,600. As of this writing, a typical mortgage rate is 7.0%. On the same loan balance, the monthly payment would be $2,660, a whopping thousand dollars a month more than the old payment."

The Impact on Divorce Decisions

The high mortgage rates are forcing many couples to reconsider their options when it comes to divorce. Here are some ways the current economic situation is affecting divorce proceedings:

Delayed Divorces: Some couples are choosing to postpone their divorce due to the financial implications of current mortgage rates.

Continued Cohabitation: Even after deciding to divorce, some couples are opting to continue living together to avoid the financial strain of refinancing or selling their home.

Creative Financial Solutions: Divorcing couples are seeking more creative solutions to divide their assets without triggering a refinance at current rates.

Increased Mediation: There's a growing trend towards mediation and collaborative divorce processes as couples try to find amicable solutions that minimize financial impact.

The Legal Perspective

Family law attorneys are adapting to this new landscape. Donna Cates, a Certified Divorce Financial Analyst, explains the challenge: "If one person keeps the house, the other person will likely demand that the mortgage be refinanced in the current occupant's name only. That relieves the other person of any legal liability for the debt. But many mortgages were taken out below four percent interest, not today's rate of around seven percent."

This situation often leads to difficult negotiations and compromises. Some couples are exploring options such as:

• Delaying the sale of the house
• One spouse buying out the other's equity over time
• Continuing to co-own the property even after divorce

The Emotional Toll

While financial considerations are paramount, the emotional aspect of delayed or complicated divorces cannot be overlooked. Dianna Lesperance, a registered counselling therapist, notes, "Whether you're the deciding factor or not in this relationship dissolution, you're going to grieve because it's hard. It's change, it's loss."

The stress of navigating a divorce in this economic climate can exacerbate already strained relationships. Couples may find themselves in a limbo state, legally married but emotionally separated, which can take a toll on mental health and family dynamics.

The Broader Economic Impact

The phenomenon of "mortgage-locked" couples isn't just a personal issue; it has broader economic implications. Conerly observes, "The economist looking at divorce in 2025 comes to two conclusions. First, the current economic conditions may lead to more divorces for low-income families. Second, the relatively high mortgage interest rates will lead to fewer divorces for home-owning couples."

This situation could lead to:

• Reduced mobility in the housing market
• Changes in consumer spending patterns
• Increased demand for rental properties
• Shifts in family law practices

Looking Ahead: Potential Solutions and Trends

As couples and legal professionals grapple with this new reality, several trends and potential solutions are emerging:

Financial Education: There's an increased focus on financial literacy and planning for couples, both before and during marriage.

Alternative Dispute Resolution: Mediation and collaborative law approaches are gaining popularity as ways to navigate complex financial situations in divorce.

Legislative Considerations: Some experts are calling for legal reforms to address the unique challenges posed by the current economic environment.

Innovative Financial Products: Financial institutions may develop new products to help divorcing couples navigate the mortgage rate dilemma.

As we move through 2025, the intersection of personal relationships and economic realities is creating new challenges for couples considering divorce. While high mortgage rates are certainly complicating the process, they're also forcing couples and legal professionals to think creatively and collaboratively.

Conerly summarizes the situation aptly: "Working through the homeownership challenge may keep some people together. In general, the economy has only a small impact on divorce rates, with general social and demographic trends driving most changes."

As we navigate this complex landscape, it's clear that the decision to divorce remains deeply personal. However, the economic realities of 2025 are adding new factors to consider, making financial planning and legal counsel more crucial than ever for couples contemplating separation.

Whether Divorce Monday 2025 sees a surge in filings or a wave of reconsiderations, one thing is certain: the interplay between personal relationships and economic factors continues to shape the landscape of modern marriage and divorce.