Higher Home Prices & Rising Rates Add 11% to the Typical Mortgage Payment

Higher home prices and rising interest rates have resulted in an 11% increase in the amount of a typical monthly mortgage payment in 2017, according to research by Corelogic. The typical monthly mortgage rate (principal & interest only) was $794 in September 2017, 11% higher than the typical mortgage of $733 recorded in September 2016. While the U.S. median sales price in September 2016 was 6.4% higher than a year earlier, mortgage rates increased by 0.4 percent over the same time frame.

On an inflation-adjusted basis, the typical mortgage payment in September 2017 remained 36.8% below the all-time peak of $1,257 in June 2006. That’s because the average mortgage rate back in June 2006 was about 6.7%, nearly double the average rate of 3.81% this September, and the inflation-adjusted median sale price in June 2006 was $244,050 (or $199,900 in 2006 dollars), compared with a median of $212,740 in September 2017.

Going forward, home prices are forecasted to increase by 3%, while rates are expected to rise by 0.6%, boosting the typical monthly mortgage payment by another 11.2% to $883 by September 2018. (In nominal terms the typical mortgage payment would rise 13.2 percent over the next year.)

Meanwhile, real disposable income is projected to rise by only 2.6% over the same period, meaning next year’s homebuyers would see even a larger share of their incomes devoted to mortgage payments.