Economists' Outlook

Housing stats and analysis from NAR's research experts.

Instant Reaction: Mortgage Rates, December 16, 2021

Mortgage rates slightly rose this week after the Fed announced a taper acceleration and three rate hikes to follow in 2022. Specifically, the 30-year fixed mortgage rate inched up to 3.12% from 3.10% the previous week. Rates will continue to rise even further in the year ahead. NAR forecasts the 30-year fixed mortgage rate to reach 3.7% by this time next year. Thus, expect rates to rise 60 to 70 basis points from where they currently are. Even with this increase, consumers should bear in mind that these rates will still be historically low. The average interest rate has risen and fallen significantly over the years. In 1980, the average rate on a 30-year fixed mortgage was 13.7%. In 2000, it was 8.0%. In 2019, before the pandemic struck our country, the average mortgage rate was 3.9%.

How will these changes to interest rates affect the monthly mortgage payments?

There is no doubt that the interest rate on a mortgage has a direct impact on the size of a mortgage payment. Higher rates increase mortgage payments while higher rates typically reduce the amount of money that people can borrow. For instance, take a $500,000 loan: If you borrow $500,000 and you put down $55,000 (a 10% down payment), you can buy a home of $555,000. The monthly mortgage payment is estimated to rise by $110 if you buy that home in Q2 2022 and by $165 if you buy that house at the end of next year. However, since interest is a percentage of the loan amount, the impact of the rate increase is bigger for larger loans. See below how much the monthly mortgage payment will change by loan size.