According to reports, the Federal Reserve will increase interest rates today (Wednesday, May 4) by 20.5 percentage points. And homebuyers across the U.S. are already facing a painful reality: Rising mortgage rates are adding thousands of dollars to the cost of buying a home each month.
According to real estate data company CoreLogic, April Buying a house now? Today’s interest rate hike is 0.5 percentage points. As mortgage interest rates rise, how much will the cost of buying a house increase? You must know! , the average interest rate on a 30-year fixed mortgage is nearly 2 percentage points higher than this time a year ago, and the median price of a home across the U.S. is 50% more expensive than the same time in April 2021. Mortgage rates have surged since the Federal Reserve announced in March its first rate hike since 2018.
Buying a $250,000 home with a 30-year fixed loan rate, which last week averaged 5.3%, would pay $3,300 more per year than it would have on a mortgage in April 2021, according to the National Association of Housing Brokers. According to the Federal Reserve Bank of St. Louis, a $429,000 home (the median price of homes) will cost you an additional $5,640 per year in principal and interest. Buying a $1 million home would mean paying an additional $13,260 per year in principal and interest.
Jacob Channel, senior economic analyst at LendingTree, said in a new report: "This additional cost may make it more difficult for some potential homebuyers to enter the increasingly expensive real estate market."
As real estate prices continue to rise , rising mortgage rates are beyond the reach of many middle-class Americans with housing dreams who must compete with real estate investors and high-income buyers. As interest rates climb, more homebuyers are opting for adjustable-rate mortgages (ARMs) — one of the financial products that contributed to the 2008 U.S. housing crash.
Economists don't expect mortgage rates to fall anytime soon. PNC Financial Services Group analysts expect the Federal Reserve to announce today that it will raise benchmark interest rates by 0.5 percentage points in an effort to slow down severe inflation. It is expected that mortgage lenders may increase mortgage interest rates accordingly.
While this will raise housing costs, it may also make it easier for some buyers to secure the home they love as more budget-conscious buyers exit the competition.
