It probably shouldn’t come as a big surprise to you that the recent increases in the Fed Prime Lending Rate and subsequent increases in mortgage lending rates. In a recent report issued by Realtor.com, you can see the impact these recent increases have had on mortgages around the country. The reports clearly show that mortgage payments are on the rise from coast to coast.
Director of economic research for Realtor.com Javier Vivas, had this to say, ” As we see rates rise this fall, we do see them taking on a bigger role in affordability and constricting buying power in certain markets.”
The Numbers Are In
The study shows the average mortgage monthly payment across the United States has increased by 15.8%, which translates to paying an additional $223. The report showed that the average monthly mortgage payment here in the U.S. in 2017 to be $1,413 in September. One year later in September of 2018 the average monthly mortgage to be $1,636. This information is derived using a median-priced home with a price of $294,900.
To further prove this point, Vivas went on to say that according to the numbers, the top 20 markets, the increase in rates has resulted in a 68% increase in mortgage payment. Earlier this spring this number stood at only 36% of the reasons for an increase in payments. While the actual percentage increase varies from market to market, there can be no doubt in anyone’s mind that this current trendof rate increases is going to have a significant impact on being able to qualify for a mortgage.
Thisis especially true for those who are already on the outer edge of being able to qualify. Those who have either annual income issues or are only looking to be eligiblefor a low-downpayment mortgage are most likely to feel the impact of a market that is already pushing mortgage rates in five percent and higher range. Many who qualified to buy a more expensive home last year, may find they have to settle for something a little less expensive or may no longer even qualify.
Is 5% Really That High?
We sit here and decry the rising interest rates and the fact they are now in the 5 percent plus range, yet is this really that high? Let’s take a look at this in a little more detail. Fannie Mac has been tracking the rates of 30-year fixed mortgages since 1971, making it much easier to take a look at ratesover the course of time. In 1984, the average rate for a 30-year fixed mortgage stood at 13.84 percent. When you look at rates this high and the fact the market was strong then, 5% doesn’t look so bad after all.
But rising interest rates are only one part of the big picture; many other factors must be taken into consideration as you try to predict what direction the market is likely to go over the next few months. The one thing you can count on is that the market may be in for a wild ride over the coming months.