Unless a homebuyer kicks up the down payment significantly, higher mortgage rates mean bigger monthly mortgage payments. And the average monthly mortgage payment has really risen quite dramatically this year.
“The median mortgage payment in December of 2021 was $1,383 a month. As of October, it is up to over $2,000, so we’re taking about a 45% increase in the first 10 months of the year,” said Edward Seiler, associate vice president of housing economics at the Mortgage Bankers Association and executive director of the Research Institute for Housing America.
The Mortgage Bankers Association runs a monthly Purchase Applications Payment Index, which measures how new monthly mortgage payments have varied relative to income. Nationwide, that index climbed to a level indicating the least affordability in May 2022. The index has risen 36% in the first 10 months of this year.
The median amount of a mortgage loan in October fell to $295,000, the lowest level since January 2021.
The Mortgage Bankers Association said, for potential buyers who can wait, its forecast calls for mortgage rates to come down sooner rather than later.
“We’re expecting the Fed to end its Fed Funds increases into the beginning of next year, so we are expecting mortgage rates to come down to 5.4% by the end of next year and then to come further down to 4.5% by the end of 2024,” Seiler said, referring to the average rate on a 30-year fixed-rate mortgage.
For those who can’t wait, there are options.
“Wait a year or so. Or get an adjustable-rate mortgage. Or get a fixed rate and hopefully be able to refinance in a couple of years,” Seiler said.