The news sounds bad: mortgage rates have risen aggressively since the presidential election, and are now at their highest level since July 2015; for the first week in December, rates posted the largest weekly jump since 2013; and the Federal Reserve may raise interest rates this week.
It all paints a discouraging picture of where housing is heading, but as a new study from Zillow reminds us, perspective will be the key factor.
Mortgage payments remain low in 2017
Zillow’s research came to some reassuring conclusions – even with rates on the rise, mortgage payments remain relatively low; even more, should interest rates increase another 25 basis points, the change in mortgage payments would be negligible.
For instance, assume that mortgage rates are at 4 percent for a 30-year FRM. Here in Houston, the average mortgage payment (assuming a 20-percent downpayment) would $671. What happens when rates rise to 4.25 percent? Payments increase a whopping $21 to $692.
Erin Lantz, the vice president of mortgages for Zillow Group, commented on the mortgage climate in the report.
“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,” Lantz said. “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 FOMC’s decision to raise rates.”
Our chart below breaks down the rise in mortgage payments more fully:
|Metro Area||Zillow Home Value Index||Mortgage Payment at 4.0%||Mortgage Payment at 4.25%||Difference in Monthly Payment|