Current 30-year fixed mortgage rates are at 5.12%, and they may continue to rise closer to 6%, says Bill McBride in the CalculatedRisk Newsletter, but despite recent gains, rates are still historically low. The Fed Funds rate is expected to rise to roughly 3.25%, and at its peak, the yield curve will flatten and the 10-year treasury rate will likely match the Fed Funds rate.
Higher mortgage rates are wiping out housing affordability across the nation in an already record-breaking market, and with more increases to come, creating more affordable housing will remain a top priority for the months and years ahead.
Higher rates will impact affordability. Based on today’s mortgage rates, affordability has declined to levels not seen since the housing bust).
However, it is important to understand that if mortgage rates double - say from 2.5% to 5.0%, monthly payments do not double. For this example, principal and interest payments would increase about 35%, and if you include taxes and insurance (PITI), payments will increase about 25%. This is a huge increase, but payments do not double when mortgage rates double.
Advertisement
Related Stories
Housing Markets
These Housing Markets Are Seeing Higher Than Average Price Increases
The majority of metros where housing costs increased fastest are in the Northeast
Affordability
FHLBank of Atlanta Commits $10M for New Affordable Housing Program
The initiative will primarily benefit homebuyers in southeastern states
New-Home Sales
More Than Half of All Homebuyers Say They Prefer New Homes
This trend comes as the price gap between new and existing homes narrows