Mortgage Rate Increases Ahead
This article by https://teamtorsneygps.com relates presently to the US situation on Mortgage increases, we will follow up with a later Blog on the UK’s similar situation.
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A year ago, the great majority of American homebuyers despaired over the state of the housing market. Prices had hit record highs. There were so few homes for sale that lines for open houses stretched for blocks and move-in ready places in desirable areas were receiving dozens of offers—and prompting soul-crushing bidding wars. It couldn’t possibly get any worse, right?
Wrong, actually! Fast-forward a year, and there are even fewer homes for sale, prices have continued their upward trajectory, and mortgage interest rates are shooting up at a breakneck pace.
The result: The real costs of homeownership—the actual payments buyers need to make each month, made up primarily by mortgage and principal costs, along with property tax and insurance—are skyrocketing. And this has severely diminished the buying power of most wannabe homeowners.
Someone purchasing the same home today will spend about 1.5 times more on their mortgage bills than they would have just one year earlier. To be clear, home prices alone haven’t risen anywhere near that high. And sellers generally aren’t pocketing that much extra cash through bidding wars. What’s happening is the higher home prices and rising rates have inflated monthly mortgage payments by about 50% in just one year.
Take that increase, then add in the highest inflation rates in 40 years—pushing up the price of gas and just about everything else—and steep drops in the stock and cryptocurrency markets, and many homebuyers are hurting.
It’s causing a paradigm shift. Most buyers have traditionally focused on the sticker price of a home (and how much extra they’ll have to offer to get it). But higher mortgage rates can significantly boost the amount homeowners will fork over to their lender. For example, nationally mortgage payments are about $1,882 a month, not including property taxes or homeowners insurance. A year ago, they were roughly $1,249.
The exact amount depends on where buyers live.
That’s why Realtor.com® looked at the increase in mortgage payments in the nation’s 15 largest metropolitan areas. In the Miami metro, buyers’ mortgage payments are 83% higher than they were just one year ago. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.) On the other end of the spectrum, mortgage payments in Detroit were up a still bruising but far less devastating 19%.
“We’re already comparing [2022] to a year that was extremely competitive,” says George Ratiu, manager of economic research at Realtor.com. “For first-time buyers, this part is challenging. First-time buyers tend to face much bigger hurdles, from coming up with down payments to being able to qualify for mortgages all the while still competing with all-cash buyers, investors, and existing homeowners who have more cash to bring to the table.”