Naive question: why don't banks offer people with <4% fixed rate mortgages the ability to buy a new house with 0.5% increase to their existing rate?

Because it makes sense and banks don't typically do things like that. /s

Crypto/web3. Author of Read Write Own

readwriteown.com

@cdixon.eth is likely deeper in the space than I am

It makes sense to me in this demand-side constrained environment. 

Likely has to do with concerns about pulling forward potential future revenue, at lower margins. That could be solved for though.

(I'm not a mortgage banker but own multiple invstmt properties and think about real estate underwriting a fair amount)

Most mortgages aren’t owned by the bank. They’ve been securitized and sold to investors. 

For the banks that do own mortgages it’s not a bad idea. But rate move has been so sudden and unprecedented so might take time before this happens, and more likely the housing market will correct first

Depending on your mortgage you may be able to move it to a new home with no change in rate