Most forecasts for the housing market predicted rising mortgage rates, and now those numbers are becoming a reality. Mortgage rates will increase to 4.8% by the end of the year and the refinance market will feel the consequences, according to CoreLogic.
- Mortgage rates will rise 90 basis points to 4.8% by the end of the year
- The average mortgage payment on a 30-year FRM is $973
- Homeowners will lose incentive to refinance under higher mortgage rates
Mortgage rates are going up and the growth will have consequences for the housing market. CoreLogic predicts rates will increase to 4.8% by the end of the year, which is bad news for those first-time homebuyers trying to break into an unaffordable housing market, according to principal economist Molly Boesel.
Housing affordability is a rampant issue across the U.S. The economy is strong and unemployment low, but wage growth is not keeping pace with affordability problems that have been magnified in recent years.
The average mortgage payment today on a 30-year fixed-rate mortgage is about $973. Homeowners are paying more on their mortgage because home prices have been rising 5% to 6% each year since the depression. Wage growth has not been keeping pace with price growth, either, which has widened the affordability gap.
The refinance market will take a hit from rising mortgage rates as well. As a rule of thumb, you would need to decrease you mortgage rates by 100 basis points to offset costs associated with refinancing. Most mortgages today have rates between 3% and 5%, so not many homeowners would benefit from refinancing with rates increasing to 4.8%.