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Mortgage Rates Will Likely Keep Rising, but Just How High Will They Go?

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Mortgage Rates Will Likely Keep Rising, but Just How High Will They Go?

Economists are gritting their teeth and bracing for higher mortgage rates ahead, but when will the increases end?

April 14, 2022
Rising housing costs graphic
Image: Stock.adobe.com

Current 30-year fixed mortgage rates are at 5.12%, and they may continue to rise closer to 6%, says Bill McBride in the CalculatedRisk Newsletter, but despite recent gains, rates are still historically low. The Fed Funds rate is expected to rise to roughly 3.25%, and at its peak, the yield curve will flatten and the 10-year treasury rate will likely match the Fed Funds rate. 

Higher mortgage rates are wiping out housing affordability across the nation in an already record-breaking market, and with more increases to come, creating more affordable housing will remain a top priority for the months and years ahead.

Higher rates will impact affordability. Based on today’s mortgage rates, affordability has declined to levels not seen since the housing bust).

However, it is important to understand that if mortgage rates double - say from 2.5% to 5.0%, monthly payments do not double. For this example, principal and interest payments would increase about 35%, and if you include taxes and insurance (PITI), payments will increase about 25%. This is a huge increase, but payments do not double when mortgage rates double.

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