How Much Will Your Monthly Payment Change?

Mortgage rates have been rising sharply over the past couple of months. The 30-year fixed-rate mortgage was 4.2 percent in December, the highest of 2015 and 2016, and it appears to stay above 4 percent for a long while. Mortgage rates are still historically low, but crossing over from the 3 percent range to 4 percent range raises worries to potential homebuyers. But, should they be worried? How much can this rise of mortgage rates change their monthly payment? How does this change of monthly payments vary by county?

We calculated the monthly payment by county based on the mortgage rate prevalent a couple of months ago (3.5 percent), the rate as of early January (4.2 percent) and a higher rate likely to be seen within the next two years (5.0 percent).

Nationwide, it is estimated that the rise of mortgage rates from 3.5 to 4.2 percent increased the monthly payment by $75 while a rise from 4.2 to 5.0 percent will increase the monthly payments by $90[1].

But the effect depends on the location. At the high end, San Francisco homebuyers have seen a nearly $375 increase in monthly payments so far, and if rates were even higher now, financing the same-priced home would cost an extra $450 per month.  At the low end, in Cochrane County, TX, home buyers are paying an extra $13 per month on account of the mortgage rate rise since November, and they could see an extra $16 per month as rates rise to 5 percent. At this end of the spectrum, the change in monthly payments seems much more manageable.

However, these examples only use the current price of homes to see the difference.  In the years ahead, NAR expects that the 30 year fixed-rate will increase to 4.4 percent in 2017 and 4.8 percent in 2018 while home prices are expected to rise 3.9 and 3.2 percent, accordingly. Rising prices in addition to rising mortgage rates will push the monthly cost of housing up even higher for new homebuyers. Existing homeowners will have the same monthly payment for those who took out fixed rate mortgage.

Select a County from the dropdown and see how much monthly payments change over the different mortgage rates:

Nationwide, it looks like monthly mortgage payment will be affected mostly in the following counties:

Data by State

Data by Price



[1] The U.S. median home value matches the county prices calculations. For comparisons purposes, the calculated median home value reflects all homes while NAR’s U.S. median price represents home sales. Thus, the calculated price ($207,566) is expected to be lower than NAR’s home value ($239,500). Please see Methodology for more details.

  1. Nice information!

  2. The increase in mortgage costs for some home buyers would be considerable, but they probably will only be paying it in cases where they are looking to borrow a mortgage amount well below their income’s maximum debt-carrying capacity — and the home they want to buy has a constant price.

    You note that home buyers in “”San Francisco have seen a nearly $375 increase in monthly payments so far”” but this is only true if they are buying a home that has the same price as one financed before mortgage rates increased. It is true that there would be an increase in cost for a home with a given price at an interest rate of 4.2 percent compared to 3.5 percent.

    However, with monthly income as a limiting factor for how much mortgage a borrower can carry, a more likely outcome of a rise in mortgage rates is that, since their income is relatively static, that a borrower will be able to qualify for less mortgage money. For example, assuming tax and insurance costs at $400 per month, a borrower with a $5,000 monthly gross income can qualify for a monthly principal and interest payment of perhaps $1,000 ($1,400 PITI payment). With an interest rate of 3.5 percent and a 30-year term, this qualifies the borrower for a mortgage of about $223,000; the same income at 4.2 percent qualifies the borrower for about $204,000.

    As such, home buyers don’t actually pay the increase in payment due to the increase in mortgage costs, but rather, must locate and purchase housing that is less expensive in order to purchase anything at all. The amount of income they can devote to their mortgage payment, determined by their income, generally remains exactly the same as before mortgage rates increased… they just get less home than they would otherwise have.