Mortgage Payments Up 13% This Year
April 9, 2018
Monthly mortgage payments have risen an average of nearly 13 percent nationwide over the last year—or an extra $168—as buyers grapple with both higher home prices and increasing mortgage rates, according to a realtor.com® analysis. Luxury buyers are feeling the worst sticker shock, paying double the rate. In the top 10 percent of the market, owners are now paying an average $241 more per month.
Mortgage interest rates are about a half of a percentage point higher than they were at the beginning of the year, and the Federal Reserve has signaled there are more hikes to come. “There is an urgency in the market,” says Pete Boomer, executive vice president at PNC Bank in Downers Grove, Ill.
Different generations of home buyers may have varying tolerance levels for mortgage rate fluctuations. Millennials are pursuing homeownership at a time when interest rates are at historic lows, averaging in the 4 percent range, while older buyers remember when they were in the double digits. So for millennials, “even a minor upswing [in interest rates] may seem significant,” The Wall Street Journal reports.
“It’s really a psychological adjustment,” Guy Cecala, publisher of Insider Mortgage Finance, told the Journal. “If you grew up with rates between 3.5 percent and 4 percent, it’s a big shock to see 4.5 percent or 5 percent.” Mortgage rates are forecast to continue increasing through the end of the year. Therefore, more buyers are reconsidering adjustable-rate mortgages, which often come with lower interest rates for a set period before increasing.
Source: “Rising Interest Rates Squeeze Homeowners’ Budgets,” The Wall Street Journal (April 4, 2018) [Log-in required.]
Updated: June 22, 2018