According to the National Association for Realtors (NAR), experts forecast that the U.S. economy is in for yet another solid year of strength, albeit not at the same level as in 2017. NAR expects that the mortgage rate for a 30-year fixed mortgage will rise to 4.4 percent in 2018 from 3.9 percent in the last quarter of 2017, an increase of 50 basis points this year. However, how will this change affect the monthly mortgage payment of homebuyers?
It is estimated that, on a 30-year fixed-rate mortgage for $380,000, each half-point increase adds about $100 to the monthly payment.
A homebuyer who wants to purchase a home with a value of $380,000 would pay $1,600 every month for the mortgage payment at a 3.9% mortgage rate
. Assuming the mortgage rate increases to 4.4%, the buyer would pay $1,700 per month in order to buy the same home. Among 177 metro areas, we see that 89% of these areas have a median home value lower than $380,000. This means that most homebuyers would see an increase of less than $100 in the monthly mortgage payment
. While mortgage rates are still historically low, the expected increase in mortgage rates should not discourage people from buying a house. See Full Article