Mortgage payments would increase only nominally should the key rate rise 0.25 percent this week, with the average homebuyer of a median-priced home seeing their payment increase by just $22 and the average homeowner seeing their payment increase by $25 or less, according to a recent analysis by Zillow.
“While those looking to buy a home are understandably concerned about the path of rates ahead, it’s important to remember that borrowing costs remain exceptionally low by historical standards,” says Erin Lantz, vice president of Mortgages for Zillow Group. “Rising rates may impact the location or size of the home they hope to purchase, but buyers that are fully committed to buying a home are unlikely to be swayed by the [Federal Open Market Committee] FOMC’s decision to raise rates.”
Homeowners in hotter markets, however, could see a considerable increase in their mortgage payment should the key rate rise 0.25 percent—in some areas, by $75 or more. The most substantial movement, according to Zillow’s analysis, would be in:
San Jose, Calif.
Mortgage Payment at 4.0% – $3,662
Mortgage Payment at 4.25% – $3,774
+$112
San Francisco, Calif.
Mortgage Payment at 4.0% – $3,139
Mortgage Payment at 4.25% – $3,234
+$95
Los Angeles-Long Beach-Anaheim, Calif.
Mortgage Payment at 4.0% – $2,233
Mortgage Payment at 4.25% – $2,301
+$68
San Diego, Calif.
Mortgage Payment at 4.0% – $2,005
Mortgage Payment at 4.25% – $2,066
+$61
Seattle, Wash.
Mortgage Payment at 4.0% – $1,566
Mortgage Payment at 4.25% – $1,613
+$47
Boston, Mass.
Mortgage Payment at 4.0% – $1,548
Mortgage Payment at 4.25% – $1,595
+$47
Mortgage rates spiked above 4 percent in the week following the election, and have kept rising since, spurring homebuyers to lock in a rate. For the average homebuyer or owner, Zillow’s analysis should ease that sense of urgency.
“It remains to be seen whether a more aggressive path of rate hikes will be implemented in 2017,” says Lantz. “Should economic indicators continue to improve and the pace of policy normalization picks up, we will eventually see the end of incredibly low mortgage rates and corresponding high affordability.”
For more information, please visit www.zillow.com.
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