Mortgage rates surged this week as the Federal Reserve raised short-term interest rates by another 0.75 of a percentage point. According to Freddie Mac, the 30-year fixed mortgage rate rose to 6.29% from 6.02% the previous week. As a result, the monthly mortgage payment for a $400,000 loan is about $2,470 compared to $1,660 a year ago.
Rising mortgage rates typically lead to lower mobility rates over time. Owners may be locked into their existing homes as mortgage rates rise, and the three-percent rates from last year may not be back anytime soon. While the nation is suffering from a severe housing shortage, lower mobility can make housing inventory even tighter and cause home prices to continue to escalate. However, homeowners should consider that they have already accumulated substantial equity in the last couple of years. The median-priced home is worth about $80,000 more than in 2020 and $200,000 more than in 2012. In the meantime, homes will continue to appreciate as prices are not expected to drop due to the low housing supply. Thus, having positive equity in one’s home may ease the effects of rising mortgage rates on mobility.