Monthly mortgage payments have
risen an average of nearly 13 percent
nationwide over the last year—or
an extra $168—as buyers grapple
with both higher home prices and
increasing mortgage rates.. Luxury
buyers are feeling the worst sticker
shock, paying double the rate. In the
top 10 percent of the market, owners
are now paying an average $241 more
per month.
Mortgage interest rates are about
a half of a percentage point higher
than they were at the beginning of
the year, and the Federal Reserve
has signaled there are more hikes
to come. There is an urgency in the
market as different generations of
home buyers experience a varying
level of tolerance for mortgage rate
fluctuations.
It's really a psychological adjustment
that seems to be dependent on what
you grew up with. Millennials came
of age when interest rates were at
historic lows, so even a minor upswing
OWNERS' BUDGETS
HOME
RISING INTEREST RATES
SQUEEZE
may seem significant. But older
borrowers may recall the days when
rates reached double digits—as high
as 18.45% in October 1981, according
to Freddie Mac—so they may perceive
rates as low even if they rise by a
percentage point or two.
Rising rates are also affecting
mortgage originations, at least
for refinances which are generally
deemed to be more discretionary
than mortgages used for purchases.
Homeowners opt to refinance when
they can reap a financial benefit
by dropping their interest rate.
But those who purchase typically
make that decision due to lifestyle
considerations—a new job, having
children or a divorce, for instance—
so they are less likely to postpone
that decision based solely on
interest rates. "The refinance market
is extremely sensitive to interest-
rate changes," said Daren Blomquist,
senior vice president at ATTOM Data
Solutions, a real-estate data firm.
