The rapid rise in mortgage rates means home buyers will need to pay significantly more for a home loan compared to even just eight months ago.
In November, a 30-year fixed-rate mortgage, the most popular home loan product, was barely 3 percent. As the rate approaches 6 percent, the added cost to a 30-year mortgage is hundreds of thousands of dollars.
A jump in rates from 3 to 6 percent causes the lifetime cost of a standard 30-year fixed-rate mortgage to increase by more than half the price of the home’s price at sale.
For a $250,000 home, the mortgage would cost $128,000 more over 30 years. That translates to a monthly mortgage bill that is $356 higher. For a home purchased at $750,000, homeowners would pay $1,067 more.
This week, mortgage rates had their biggest one-week jump in decades. The 30-year fixed-rate mortgage now stands at 5.78 percent, a level not seen since 2008, according to data released by Freddie Mac.
Higher rates can be a major factor in deciding whether to buy a home and signs of a cooling housing market were already apparent this year. While Realtor.com originally forecast a 6.6 percent increase in home sales this year, the real estate listing website recently downgraded its projection to a 6.7 percent decrease in 2022 compared with the prior year.